38434 Federal Register / Vol. 83, No. 151 / Monday, August 6, 2018 / Notices 

58Cf. Ohio v. American Express, No. 16–1454 (S. 

Ct. June 25, 2018), https://www.supremecourt.gov/ 

opinions/17pdf/16-1454_5h26.pdf (recognizing the 

need to analyze both sides of a two sided platform 

market in order to determine its competitiveness). 

59 15 U.S.C. 78s(b)(3)(A)(ii). 

60 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 83129 

(April 30, 2018), 83 FR 20131 (‘‘Notice’’). 

4See Letter from Eugene P. Torpey, Chief 

Compliance Officer, Vandham Securities Corp., 

dated May 10, 2018. Comments on the proposed 

rule change are available at https://www.sec.gov/ 

comments/sr-finra-2018-015/finra2018015.htm. 

5 15 U.S.C. 78s(b)(2). 

6See Securities Exchange Act Release No. 83422, 

83 FR 28483 (June 19, 2018). 

7See Letter from Racquel L. Russell, Associate 

General Counsel, FINRA, to Brent J. Fields, 

Secretary, Commission (‘‘FINRA Letter’’). The 

sales that will be adverse to its overall 

profitability. In other words, an increase 

in the price of data will ultimately have 

to be accompanied by a decrease in the 

cost of executions, or the volume of both 

data and executions will fall.58

Moreover, the level of competition 

and contestability in the market is 

evident in the numerous alternative 

venues that compete for order flow, 

including SRO markets, internalizing 

broker-dealers and various forms of 

alternative trading systems (‘‘ATSs’’), 

including dark pools and electronic 

communication networks (‘‘ECNs’’). 

Each SRO market competes to produce 

transaction reports via trade executions, 

and two FINRA-regulated TRFs compete 

to attract internalized transaction 

reports. It is common for broker-dealers 

to further exploit this competition by 

sending their order flow and transaction 

reports to multiple markets, rather than 

providing them all to a single market. 

Competitive markets for order flow, 

executions, and transaction reports 

provide pricing discipline for the inputs 

of proprietary data products. The large 

number of SROs, TRFs, broker-dealers, 

and ATSs that currently produce 

proprietary data or are currently capable 

of producing it provides further pricing 

discipline for proprietary data products. 

Each SRO, TRF, ATS, and broker-dealer 

is currently permitted to produce 

proprietary data products, and many 

currently do or have announced plans to 

do so, including Nasdaq, NYSE, NYSE 

American, NYSE Arca, IEX, and BATS/ 

Direct Edge. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were either 

solicited or received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 

19(b)(3)(A)(ii) of the Act.59

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is: (i) Necessary or appropriate in 

the public interest; (ii) for the protection 

of investors; or (iii) otherwise in 

furtherance of the purposes of the Act. 

If the Commission takes such action, the 

Commission shall institute proceedings 

to determine whether the proposed rule 

should be approved or disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

NASDAQ–2018–058 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–NASDAQ–2018–058. This 

file number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549 on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–NASDAQ–2018–058 and 

should be submitted on or before 

August 27, 2018. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.60

Robert W. Errett, 

Deputy Secretary. 

[FR Doc. 2018–16720 Filed 8–3–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83753; File No. SR–FINRA– 

2018–015] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Order Granting 

Approval of a Proposed Rule Change 

To Amend FINRA Rule 6433 To Adopt 

the OTC Quotation Tier Pilot as 

Permanent 

July 31, 2018. 

I. Introduction 

On April 20, 2018, Financial Industry 

Regulatory Authority, Inc. (‘‘FINRA’’) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’), pursuant 

to Section 19(b)(1) of the Securities 

Exchange Act of 1934 (‘‘Act’’) 1 and Rule 

19b–4 thereunder,2 a proposed rule 

change to amend FINRA Rule 6433 to 

adopt as permanent the minimum 

quotation sizes that are applicable to 

quotations in over-the-counter (‘‘OTC’’) 

equity securities and that were 

implemented on a pilot basis. The 

proposed rule change was published for 

comment in the Federal Register on 

May 7, 2018.3 The Commission received 

one comment letter on the proposed 

rule change.4 On June 13, 2018, 

pursuant to Section 19(b)(2) of the Act,5

the Commission designated a longer 

period within which to approve the 

proposed rule change, disapprove the 

proposed rule change, or institute 

proceedings to determine whether to 

disapprove the proposed rule change.6

In a letter dated July 5, 2018, FINRA 

responded to the comment letter.7


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FINRA Letter is available at https://www.sec.gov/ 

comments/sr-finra-2018-015/finra2018015- 

4002848-167246.pdf. 

8An OTC equity security is an equity security 

that is not an ‘‘NMS Stock’’ as defined in Rule 

600(b)(47) of Regulation NMS; provided, however, 

that the term ‘‘OTC equity security’’ shall not 

include any Restricted Equity Security. See FINRA 

Rule 6420(f). 

9See Securities Exchange Act Release No. 65568 

(October 14, 2011), 76 FR 65307 (October 20, 2011) 

(Notice of Filing of File No. SR–FINRA–2011–058) 

(‘‘Original Proposal’’). Comments on the Original 

Proposal are available at https://www.sec.gov/ 

comments/sr-finra-2011-058/finra2011058.shtml. 

10See Securities Exchange Act Release No. 67208 

(June 15, 2012), 77 FR 37458 (June 21, 2012) (Notice 

of Filing of Amendment No. 2 and Order Granting 

Accelerated Approval of a Proposed Rule Change, 

as Modified by Amendment Nos. 1 and 2, To 

Amend FINRA Rule 6433 (Minimum Quotation 

Size Requirements for OTC Equity Securities)) 

(‘‘Order Approving Tier Size Pilot’’). 

11See Securities Exchange Act Release No. 70839 

(November 8, 2013), 78 FR 68893 (November 15, 

2013) (Notice of Filing and Immediate Effectiveness 

of a Proposed Rule Change to Extend the Tier Size 

Pilot to November 14, 2014; File No. SR–FINRA– 

2013–049); Securities Exchange Act Release No. 

73299 (October 3, 2014), 79 FR 61120 (October 9, 

2014) (Notice of Filing and Immediate Effectiveness 

of a Proposed Rule Change to Extend the Tier Size 

Pilot to February 13, 2015; File No. SR–FINRA– 

2014–041); Securities Exchange Act Release No. 

74251 (February 11, 2015), 80 FR 8741 (February 

18, 2015) (Notice of Filing and Immediate 

Effectiveness of a Proposed Rule Change to Extend 

the Tier Size Pilot to May 15, 2015; File No. SR– 

FINRA–2015–002); Securities Exchange Act Release 

No. 74927 (May 12, 2015), 80 FR 28327 (May 18, 

2015) (Notice of Filing and Immediate Effectiveness 

of a Proposed Rule Change to Extend the Tier Size 

Pilot to August 14, 2015; File No. SR–FINRA–2015– 

010); Securities Exchange Act Release No. 75639 

(August 7, 2015), 80 FR 48615 (August 13, 2015) 

(Notice of Filing and Immediate Effectiveness of a 

Proposed Rule Change to Extend the Tier Size Pilot 

to December 11, 2015; File No. SR–FINRA–2015– 

028); Securities Exchange Act Release No. 76519 

(November 24, 2015), 80 FR 75155 (December 1, 

2015) (Notice of Filing and Immediate Effectiveness 

of a Proposed Rule Change to Extend the Tier Size 

Pilot to June 10, 2016; File No. SR–FINRA–2015– 

051); Securities Exchange Act Release No. 77923 

(May 26, 2016), 81 FR 35432 (June 2, 2016) (Notice 

of Filing and Immediate Effectiveness of a Proposed 

Rule Change to Extend the Tier Size Pilot to 

December 9, 2016; File No. SR–FINRA–2016–016); 

Securities Exchange Act Release No. 79401 

(November 25, 2016), 81 FR 86762 (December 1, 

2016) (Notice of Filing and Immediate Effectiveness 

of a Proposed Rule Change to Extend the Tier Size 

Pilot to June 9, 2017; File No. SR–FINRA–2016– 

044); Securities Exchange Act Release No. 80727 

(May 18, 2017), 82 FR 23953 (May 24, 2017) (Notice 

of Filing and Immediate Effectiveness of a Proposed 

Rule Change to Extend the Tier Size Pilot to 

December 8, 2017; File No. SR–FINRA–2017–014); 

and Securities Exchange Act Release No. 82153 

(November 22, 2017), 82 FR 56300 (November 28, 

2017) (Notice of Filing and Immediate Effectiveness 

of a Proposed Rule Change to Extend the Tier Size 

Pilot to June 7, 2018; File No. SR–FINRA–2017– 

035) 

12See Securities Exchange Act Release No. 83392 

(June 7, 2018), 83 FR 27638 (June 13, 2018) (Notice 

of Filing and Immediate Effectiveness of a Proposed 

Rule Change to Extend the Tier Size Pilot to 

December 7, 2018; File No. SR–FINRA–2018–022). 

13See Order Approving Tier Size Pilot, supra 

note 10, 77 FR at 37458. 

14See FINRA Regulatory Notice 12–51 (November 

2012), available at: http://www.finra.org/industry/ 

notices/12-51; see also FINRA Regulatory Notice 

12–37 (August 2012), available at: http://

www.finra.org/industry/notices/12-37. 

15FINRA initially proposed six tiers, some of 

which differed from those tiers that ultimately were 

adopted. However, in response to comments 

received, FINRA amended its original filing to 

increase the minimum quotation size for most price 

points between $0.02 and $1.00. FINRA stated that 

the amended tiers were intended to facilitate the 

display of additional liquidity by market makers. 

See Securities Exchange Act Release No. 66819 

(April 17, 2012), 77 FR 23770 (April 20, 2012) 

(Amendment No. 1 to File No. SR–FINRA–2011– 

058); see also Original Proposal, supra note 9. 

16FINRA Rule 6434, among other things, 

prohibits members from displaying a bid or offer in 

an OTC equity security in an increment smaller 

than $0.01 if the bid or offer is priced $1.00 or 

greater per share, or in an increment smaller than 

$0.0001 if the bid or offer is priced below $1.00. 

This order approves the proposal. 

II. FINRA’s Description of the Proposed 

Rule Change 

FINRA proposes to amend FINRA 

Rule 6433 (Minimum Quotation Size 

Requirements for OTC Equity 

Securities) to adopt as permanent the 

minimum quotation sizes applicable to 

quotations in OTC equity securities 8

that were proposed pursuant to File No. 

SR–FINRA–2011–058 9 and 

implemented on a pilot basis on 

November 12, 2012 (‘‘Tier Size Pilot’’ or 

‘‘Pilot’’). The Pilot initially was 

approved for a one-year term,10 has been 

extended a number of times,11 and 

currently is scheduled to expire on 

December 7, 2018.12

According to FINRA, the Pilot tiers 

are designed to: (1) Simplify the 

structure of the minimum quotation 

sizes for OTC equity securities; (2) 

facilitate the display of customer limit 

orders under FINRA Rule 6460 (Display 

of Customer Limit Orders) (‘‘limit order 

display rule’’); and (3) expand the scope 

of FINRA Rule 6433 to provide for 

uniform treatment of the types and 

sources of quotations that would be 

subject to FINRA Rule 6433.13 FINRA 

believes that the Pilot has resulted in its 

intended objectives, and particularly 

notes that the Pilot has yielded a 

significant positive result with regard to 

increased display of customer limit 

orders. FINRA states that, at the same 

time, market quality measures have 

been neutral (i.e., unchanged) or slightly 

positive (i.e., slightly improved) overall 

during the Pilot, as compared to the prePilot period, as discussed more fully 

below. Accordingly, FINRA believes 

that it is appropriate and consistent 

with the Act to adopt the Pilot tier sizes 

on a permanent basis. 

Objectives of the Pilot 

FINRA Rule 6433 sets forth the 

minimum quotation sizes applicable to 

the display of quotations in OTC equity 

securities on any inter-dealer quotation 

system that permits quotation updates 

on a real-time basis. FINRA Rule 6433 

provides different minimum quotation 

sizes that apply depending upon the 

price level of the bid or offer in the 

security. 

Prior to the Pilot, which has been in 

effect since November 12, 2012,14

FINRA Rule 6433 provided for nine tier 

sizes that applied only to market 

makers’ proprietary quotes. The prePilot tiers ranged in price points from 

$0.00 through $2,500.01, and are shown 

below in Table 1. 

TABLE 1 

Price 

(bid or offer) 

Minimum 

quote 

size 

(number of 

shares) 

$0 to $0.50 ........................... 5,000 

$0.51 to $1.00 ...................... 2,500 

$1.01 to $10.00 .................... 500 

$10.01 to $100.00 ................ 200 

$100.01 to $200.00 .............. 100 

$200.01 to $500.00 .............. 25 

$500.01 to $1,000.00 ........... 10 

$1,000.01 to $2,500.00 ........ 5 

$2,500.01+ ............................ 1 

Under the Pilot, the number of tiers 

was reduced from nine to six tiers, and 

the tiers apply to all quotations 

displayed by market makers, whether 

representing proprietary or customer 

interest, as well as quotations displayed 

by non-market makers (i.e., alternative 

trading systems or any other member 

firm).15

In addition, for price points between 

$1.00 and $174.99, the Pilot established 

a minimum quotation size of 100 shares, 

which is comparable to the minimums 

generally applicable to quotations in 

securities on equity exchanges. The 

Pilot also revised the smallest price 

point from $0.00 to $0.0001 to conform 

to the minimum quotation increments 

under FINRA Rule 6434 (Minimum 

Pricing Increment for OTC Equity 

Securities).16 The Pilot tiers that 

ultimately were adopted are shown 

below in Table 2. 

TABLE 2 

Price 

(bid or offer) 

Minimum 

quote 

size 

(number of 

shares) 

$0.0001 to $0.0999 .............. 10,000 

$0.10 to $0.1999 .................. 5,000 

$0.20 to $0.5099 .................. 2,500 


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17See FINRA Rule 6460 (Display of Customer 

Limit Orders). 

18See Memorandum to File No. SR–FINRA– 

2011–058 re: FINRA Proposal to Reduce Minimum 

Quotation Size in OTC Market Tiers from Division 

of Risk, Strategy, and Financial Innovation, dated 

June 1, 2012, available at: http://www.sec.gov/ 

comments/sr-finra-2011-058/finra2011058-13.pdf 

(‘‘Memorandum from Division of Risk, Strategy, and 

Financial Innovation’’). 

19See supra note 9. 

20See Order Approving Tier Size Pilot, supra 

note 10. 

21See id. 

22See id. at 37461–62. 

23See Order Approving Tier Size Pilot, supra 

note 10. 

24FINRA engaged a third-party, Cornerstone 

Research, to conduct an analysis of the impact of 

the Pilot on OTC market quality. The ‘‘OTC Tier 

Size Analysis’’ prepared by Cornerstone Research 

and the accompanying FINRA Executive Summary 

were submitted as Exhibit 3a of the instant 

proposed rule change and are available at https:// 

www.sec.gov/rules/sro/finra/2018/34-83129- 

ex3a.pdf (‘‘2013 Assessment’’). 

25See supra notes 11 and 12. 

26See DERA Staff Memorandum regarding 

FINRA’s Pilot Program Amending Minimum 

Quotation Size Requirements for OTC Equity 

Securities (SR–FINRA–2011–058), dated July 28, 

2017, available at: https://www.sec.gov/files/otc_

tiersizepilot_memo.pdf (‘‘DERA Memo to File’’). 

TABLE 2—Continued 

Price 

(bid or offer) 

Minimum 

quote 

size 

(number of 

shares) 

$0.51 to $0.9999 .................. 1,000 

$1.00 to $174.99 .................. 100 

$175.00+ ............................... 1 

FINRA states that the Pilot was 

designed to facilitate the display of 

customer limit orders under FINRA’s 

limit order display rule, which generally 

requires that OTC market makers fully 

display better-priced customer limit 

orders (or same-priced customer limit 

orders that are at the best bid or offer 

and that increase the OTC market 

maker’s size by more than a de minimis 

amount).17 Pursuant to FINRA’s limit 

order display rule, OTC market makers 

are not required to display a customer 

limit order on an inter-dealer quotation 

system unless doing so would comply 

with the minimum quotation size 

applicable to the price of the quotation 

under FINRA Rule 6433. Therefore, 

although a customer limit order 

otherwise would have been required to 

be displayed under the limit order 

display rule—for example, because it 

improved price or the size (more than a 

de minimis amount)—if the size of the 

order were less than the minimum 

quotation size prescribed by FINRA 

Rule 6433, the member would not be 

required to display the order. Thus, 

FINRA believed that the revisions 

implemented by the Pilot would 

improve the overall display of customer 

limit orders. 

For example, because the Pilot would 

reduce the minimum quotation size 

from 2,500 to 100 shares for securities 

priced at or above $1.00, FINRA 

believed that competitively priced 

customer limit orders, which tend to be 

smaller-sized orders, would more likely 

be displayed and potentially yield a 

variety of benefits, including improved 

price transparency, enhanced execution 

of customer limit orders, and narrower 

spreads. In addition, in a memorandum 

on the potential effects of the Pilot, 

Commission staff of the Division of 

Risk, Strategy and Financial Innovation 

(n/k/a the Division of Economic 

Research and Analysis (‘‘DERA’’)) noted 

that enhanced visibility of customer 

limit orders could reduce customers’ 

execution costs.18

An additional objective of the Pilot 

was to expand the scope of FINRA Rule 

6433 to apply to all member quotations 

on an inter-dealer quotation system. 

Prior to the Pilot, FINRA Rule 6433 

applied only to market makers’ 

proprietary quotes in OTC equity 

securities on an inter-dealer quotation 

system. Under the Pilot, the minimum 

tier sizes apply to any member 

quotations entered on an inter-dealer 

quotation system (including quotes 

representing customer interest and 

quotations entered by non-market 

makers). 

Concerns Raised Regarding FINRA’s 

Original Proposal 

The Commission received several 

comments in response to FINRA’s 

Original Proposal.19 Commenters 

generally were supportive of the goal of 

increased customer limit order 

display.20 However, commenters also 

raised concerns regarding the impact of 

the proposed revisions to the tiers in 

FINRA Rule 6433. Specifically, some 

commenters questioned whether the 

proposed Pilot might harm market 

quality by permitting market makers to 

post quotes representing minimum 

dollar value commitments that would 

not be financially meaningful, or 

otherwise would erode market maker 

liquidity in OTC equity securities.21 In 

addition, some commenters believed 

that there was not sufficient data 

analysis to support the proposed 

changes to the then existing tier sizes.22

In response to commenters’ concerns, 

FINRA filed Amendment No. 1 to the 

Original Proposal to increase the 

minimum quotation sizes for most price 

points between $0.02 and $1.00, and 

proposed that the revised tiers operate 

as a one-year pilot program instead of 

on a permanent basis. FINRA also 

submitted Amendment No. 2 to the 

Original Proposal, which, among other 

things, specified the items of data that 

FINRA would collect and provide to the 

Commission during the duration of the 

Pilot. These data items were: 

1. The price of the first trade of each 

trading day executed at or after 9:30:00 

a.m., based on execution time. 

2. The price of the last trade of each 

trading day executed at or before 4:00:00 

p.m., based on execution time. 

3. Daily share volume. 

4. Daily dollar volume. 

5. Number of limit orders from 

customers and in total. 

6. Percentage of the day that the size 

of the Best Bid or Offer (‘‘BBO’’) equals 

the minimum quote size. 

7. Number of market makers actively 

quoting. 

8. Number of executions from a limit 

order and number of limit orders at the 

BBO or better by tier size from a 

customer and in total. 

9. Liquidity/BBO metrics 

a. Time-weighted quoted spread. 

b. Effective spread. 

c. Time-weighted quoted depth 

(number of shares) at the inside. 

d. Time-weighted quoted depth 

(dollar value of shares) at the inside. 

FINRA also committed to submitting 

an assessment, at least 60 days before 

the end of the Pilot, that would address 

the impact of the proposed Pilot, the 

concerns raised by commenters during 

the rule filing process, and whether the 

proposed Pilot resulted in its desired 

effects.23

Pilot Assessment 

FINRA submitted an assessment on 

the operation of the Tier Size Pilot on 

September 13, 2013, which utilized 

pilot data covering the period from 

November 12, 2012 through June 30, 

2013.24 The 2013 Assessment, discussed 

in greater detail below, included a 

recommendation, based on the analysis 

conducted, that the Pilot tiers be 

adopted as permanent. Nonetheless, 

FINRA submitted proposed rule changes 

to extend the Pilot’s duration to allow 

the effects of the Pilot to be more 

thoroughly reviewed.25 During this 

extension period, DERA conducted a 

study, dated July 28, 2017, that assessed 

the impact of the Pilot on the liquidity 

of OTC equity securities.26 Although the 

two studies covered different time 

periods and employed different 

methods, FINRA notes that the DERA 

Memo to File reported findings 

consistent with those of the 2013 

Assessment. In light of the 2013 


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27FINRA engaged in outreach with member firms 

that are active in the market for OTC equity 

securities regarding the operation of the Tier Size 

Pilot, and the majority of those firms did not oppose 

the permanent adoption of the Pilot. 

28See Order Approving Tier Size Pilot, supra 

note 10, 77 FR at 37466. See also Memorandum 

from Division of Risk, Strategy, and Financial 

Innovation, supra note 18. 

29See Notice, supra note 3. 

30See Notice, supra note 3. 

31Table 3 originally was included in FINRA’s 

Executive Summary, dated September 13, 2013, 

which is part of the 2013 Assessment. See supra 

note 24. See also Notice, supra note 3. 

32Table 4 was included in the Notice, supra note 

3. 

Assessment, FINRA’s further 

observations, and the DERA Memo to 

File, FINRA continues to believe that it 

is appropriate for the Commission to 

approve permanently the tier sizes that 

have been in operation since November 

12, 2012. 

According to FINRA, the 2013 

Assessment demonstrates that the Pilot 

has accomplished its objectives, 

including increased customer limit 

order display, and that key market 

quality indicators have been unchanged 

or have slightly improved overall. 

FINRA continued to collect and provide 

Pilot data to the Commission after the 

issuance of the 2013 Assessment. In 

addition, FINRA continued to monitor 

the impact of the operation of the Pilot 

on market quality metrics for the overthe-counter marketplace, which FINRA 

generally believes indicate positive 

trends overall, thus providing continued 

support for permanent adoption of the 

Pilot tiers.27 Moreover, FINRA states 

that the DERA Memo to File provides 

further evidence, in a regression 

framework, to support the conclusion 

that the Pilot had a neutral to positive 

impact on market quality. 

FINRA further believes that the 2013 

Assessment demonstrates that the Pilot 

has resulted in a meaningful increase in 

the display of customer limit orders. 

Moreover, FINRA believes that the data 

collected during the Pilot also supports 

that market quality has not been 

harmed, as suggested by the analysis of 

market quality measures such as spreads 

and market depth. 

(A) Enhanced Customer Limit Order 

Display 

According to FINRA, when the 

Commission approved the Pilot, it 

recognized the potential benefits of 

enhancing customer limit order display. 

Notably, the Commission stated that 

‘‘[i]n the Commission’s view, FINRA’s 

proposed revisions are designed to 

protect investors by revising the . . . 

tier thresholds [in FINRA Rule 6433] 

such that a larger percentage of 

customer limit orders are reflected in 

quotations for OTC equity securities, 

thereby potentially improving the prices 

at which customer limit orders will be 

executed, consistent with the protection 

of investors and the public interest.’’ 28

FINRA believes that the Pilot has 

achieved the objective of increased 

customer limit order display. 

As noted in the 2013 Assessment, 

FINRA analyzed the number of 

customer limit orders that would be 

eligible under both the Pilot and the 

pre-Pilot tier sizes and observed that 

between November 1, 2012 and June 30, 

2013, for all tier sizes combined, there 

was a 13% increase in the number of 

customer limit orders that met the 

minimum quotation sizes to be eligible 

for display under the Pilot tiers.29 For 

that same period, FINRA also observed 

a significant increase in the number of 

customer limit orders in securities 

priced between $0.20 and $100.00 that 

became eligible for display. According 

to FINRA, this trend continued through 

July 31, 2014. Specifically, for the 

period between July 1, 2013 and July 31, 

2014, FINRA indicates that it observed, 

for all tier sizes combined, an 18.45% 

increase in the number of customer 

limit orders that met the minimum 

quotation sizes and, therefore, were 

eligible for display, with the most 

significant increase observed for 

securities priced between $0.20 and 

$100.00.30

Tables 3 31 and 4 32 below show the 

percentage of customer limit orders that 

were equal to or greater than the 

minimum quotation size under both the 

Pilot and pre-Pilot tier sizes for the 

specified price ranges for the periods of 

November 1, 2012 through June 30, 

2013, and from July 1, 2013 through July 

31, 2014, respectively. 

TABLE 3 

[November 1, 2012 through June 30, 2013] 

Price range Pilot tier size 

Customer limit 

orders ≥ tier 

size 

(%) 

Pre-pilot tier 

size 

Customer limit 

orders ≥ tier 

size 

(%) 

0.0001–0.0999 ................................................................................................. 10,000 78.29 5,000 86.30 

0.10–0.1999 ..................................................................................................... 5,000 56.89 5,000 56.89 

0.20–0.5099 ..................................................................................................... 2,500 57.35 5,000 43.30 

0.51–0.9999 ..................................................................................................... 1,000 72.81 2,500 46.05 

1.00–10.00 ....................................................................................................... 100 97.86 500 74.73 

10.01–100.00 ................................................................................................... 100 98.24 200 87.93 

100.01–174.99 ................................................................................................. 100 90.49 100 90.49 

175.00–200.00 ................................................................................................. 1 100 100 96.71 

200.01–500.00 ................................................................................................. 1 100 25 90.74 

500.01–1,000.00 .............................................................................................. 1 100 10 64.62 

1,000.00–2,500.00 ........................................................................................... 1 100 5 61.38 

2,500.00+ ......................................................................................................... 1 100 1 100.00 

TABLE 4 

[July 1, 2013 through July 31, 2014] 

Price range Pilot tier size 

Customer limit 

orders ≥ tier 

size 

(%) 

Pre-pilot tier 

size 

Customer limit 

orders ≥ tier 

size 

(%) 

0.0001–0.0999 ................................................................................................. 10,000 78.29 5,000 88.70 


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33See Order Approving Tier Size Pilot, supra 

note 10, 77 FR at 37467. 

34 Id. 

35FINRA notes that, from an analytical 

perspective, changes in market quality measures 

may not be attributable solely as a result of the 

Pilot, since they also may be impacted by other 

contemporaneous market factors. 

36FINRA points out that for Tier 1 securities, the 

DERA Memo to File finds that both quoted and 

effective spreads increased between the pre-Pilot 

period (November 14, 2011 through October 31, 

2012) and the Pilot period (November 12, 2012 

through November 28, 2014) covered by the 

analysis. However, the DERA Memo to File does not 

find sufficient evidence that these increases in 

spreads were caused by the Pilot, because spreads 

had started to widen at least six months prior to the 

implementation of the Pilot. 

TABLE 4—Continued 

[July 1, 2013 through July 31, 2014] 

Price range Pilot tier size 

Customer limit 

orders ≥ tier 

size 

(%) 

Pre-pilot tier 

size 

Customer limit 

orders ≥ tier 

size 

(%) 

0.10–0.1999 ..................................................................................................... 5,000 56.89 5,000 57.78 

0.20–0.5099 ..................................................................................................... 2,500 57.35 5,000 42.31 

0.51–0.9999 ..................................................................................................... 1,000 72.81 2,500 42.10 

1.00–10.00 ....................................................................................................... 100 97.86 500 68.36 

10.01–100.00 ................................................................................................... 100 98.24 200 78.03 

100.01–174.99 ................................................................................................. 100 90.49 100 90.60 

175.00–200.00 ................................................................................................. 1 100 100 91.94 

200.01–500.00 ................................................................................................. 1 100 25 89.41 

500.01–1,000.00 .............................................................................................. 1 100 10 66.65 

1,000.00–2,500.00 ........................................................................................... 1 100 5 65.58 

2,500.00+ ......................................................................................................... 1 100 1 100.00 

FINRA states that, as was noted in the 

2013 Assessment, of the 301,628,686 

customer limit orders in OTC equity 

securities reported to FINRA’s Order 

Audit Trail System (‘‘OATS’’) between 

November 1, 2012 and June 30, 2013, 

over 86.6% were priced between $0.20 

and $100.00. FINRA further notes that 

58.7 million customer limit orders, or 

almost 20% of all customer limit orders, 

were priced between $1.00 and $10.00. 

According to FINRA, this price range 

experienced an increase of almost 24% 

in the number of customer limit orders 

that met the minimum quotation size to 

be eligible for display under the Pilot. 

Further, 181.6 million customer limit 

orders, or over 60% of all customer limit 

orders, were priced between $10.01 and 

$100.00. FINRA observes that this price 

range experienced an increase of over 

10% in the number of customer limit 

orders that met the Pilot tier sizes and 

were eligible for display under the Pilot 

tier sizes. FINRA points out that the 

2013 Assessment found that an 

additional 32 million customer limit 

orders priced between $1.00 and 

$100.00 became eligible for display 

during the Pilot that otherwise would 

not have been eligible for display. 

According to FINRA, the trends 

during the period since the 2013 

Assessment are similar. FINRA states 

that of the 573,973,197 customer limit 

orders in OTC equity securities reported 

to OATS between July 1, 2013 and July 

31, 2014, 81.4% were priced between 

$0.20 and $100.00. FINRA notes that 

114.5 million customer limit orders, or 

almost 20% of all customer limit orders, 

were priced between $1.00 and $10.00. 

From July 1, 2013 through July 31, 2014, 

this price range experienced an increase 

of over 29% in the number of customer 

limit orders that met the minimum 

quotation size to be eligible for display 

under the Pilot than would have been 

eligible in the absence of the Pilot. 

Further, 312.1 million customer limit 

orders, or over 54% of all customer limit 

orders, were priced between $10.01 and 

$100.00. FINRA remarks that this price 

range experienced an increase of over 

19% in the number of customer limit 

orders that met the Pilot tier sizes and 

were eligible for display under the Pilot 

tier sizes. Consequently, an additional 

94.9 million customer limit orders 

priced between $1.00 and $100.00 

became eligible for display during the 

Pilot between June 30, 2013 and July 31, 

2014 than otherwise would have been 

eligible for display. 

FINRA states that there was an 

aggregate overall increase in displayed 

customer limit orders in OTC equity 

securities over the period from 

November 12, 2012 through July 31, 

2014 of 16.24%, representing 

approximately 142 million additional 

orders than otherwise would have been 

eligible for display As a result, FINRA 

believes that the impact of the Pilot on 

limit order display has been positive, 

with stronger than average results 

concentrated in the price points ranging 

from $10.01 and $100.00 (the range in 

which the majority of all customer limit 

orders fell (approximately 57%)). 

(B) Impact on Market Quality 

FINRA explains that when the 

Commission approved the Pilot, it 

acknowledged that the Pilot may raise 

issues of ‘‘potentially competing 

forces’’—enhanced customer limit order 

display on the one hand and potential 

harm to OTC equity market quality 

(liquidity, efficiency, and volatility) on 

the other.33 FINRA notes that the 

Commission, however, expressed the 

view that ‘‘as well as increasing the 

number of customer limit orders eligible 

for display and the potential for better 

executions, arguments can be made that 

FINRA’s proposal will benefit the OTC 

market by facilitating market making 

activity, narrowing spreads and 

increasing liquidity.’’ 34

FINRA believes that analysis of the 

Pilot and pre-Pilot data generally shows 

that the market quality measures that 

the Commission had identified—i.e., 

market maker activity, spreads and 

liquidity—were unchanged to slightly 

improved, and that therefore there has 

been an overall neutral to positive 

impact on OTC market quality for the 

majority of Pilot tiers as compared to the 

pre-Pilot data.35

As noted in the 2013 Assessment, 

where the minimum quotation size 

decreased under the Pilot, effective 

spreads generally remained the same or 

narrowed, quoted spreads narrowed, 

and price impact generally decreased. 

The 2013 Assessment also stated that 

some of the market quality metrics 

provided inconclusive results, 

specifically for Tier 1 securities, where 

the minimum quote size requirement 

had increased under the Pilot. FINRA 

remarks that the 2013 Assessment 

documented that effective spreads had 

widened, but with no significant 

reduction in quoted depth.36

In the post-2013 Assessment period of 

July 1, 2013 through July 31, 2014, 


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Federal Register / Vol. 83, No. 151 / Monday, August 6, 2018 / Notices 38439 

37The number of stocks quoted on the OTC 

market remained stable at around 10,000 

throughout the pre-Pilot period and during the 

period covered in the 2013 Assessment, as well as 

during FINRA’s subsequent observations 

(November 1, 2012 through July 31, 2014). 38There was an average of nine market-makers for 

each symbol with no significant change in the 

number of market makers between the pre-Pilot 

period and during the period covered in the 2013 

Assessment and during FINRA’s subsequent 

observations (November 1, 2012 through July 31, 

2014). 39The daily number of trades executed during the 

year prior to the Pilot is estimated at approximately 

75,000, and reached around 250,000 trades by the 

end of the first quarter in 2014. 40The daily average number of trades was 

approximately 100,000 by July 2014. 41For stocks in price tiers where the minimum 

quotation size requirement had decreased, the 

DERA Memo to File also finds that both quoted and 

effective spreads had decreased between the prePilot period (from November 14, 2011 to October 

31, 2012) and the Pilot period (November 12, 2012 

to November 28, 2014) covered by the analysis. 

Furthermore, the DERA Memo to File’s analysis 

suggests that these decreases in spreads may reflect 

causal effects of the Pilot. In contrast, for stocks in 

price tiers where the minimum quotation size 

requirement increased or remained the same, the 

DERA Memo to File does not find sufficient 

evidence that the Pilot had a causal impact on 

spreads. 

42As FINRA discussed in the 2013 Assessment, 

the price impact of hypothetical market orders is 

the effective half spread for a hypothetical market 

‘‘sweep’’ order of a particular size. In other words, 

it is an estimate of what the volume-weighted 

average effective half spread would have been had 

a market order been broken up and routed to the 

market makers based on price priority. 

FINRA observes that the number of 

stocks quoted in the OTC market has 

remained relatively constant 37 and 

market makers continued to provide 

liquidity.38 The number of BBO quotes 

also significantly increased throughout 

2014, which was the second year of the 

Pilot, as the number of quotes generally 

hovered around 2 million per day 

during the Pre-Pilot period, but steadily 

increased, reaching a high of 

approximately 6 million per day in early 

2014 and leveling off to an average of 5 

million per day during the month of 

July 2014. The average number of trades 

per day was higher during the first two 

years of the Pilot compared to the prePilot level, and more than tripled by 

March 2014.39 FINRA states, however, 

that trading activity appears to have 

leveled-off in mid-2014, albeit still at 

levels above the pre-Pilot trading.40

Liquidity continued to be provided at 

levels greater than the minimum 

required depth, evidenced by 

executions at sizes greater than the 

required minimums, which enabled the 

execution of large trades in the OTC 

market. For example, for Tier 1 

securities where the minimum 

quotation size increased, the number of 

trades executed above the minimum 

size increased by approximately 75%. 

Although there was virtually no change 

in the frequency of trades above the 

minimum size for Tiers 2 and 3, FINRA 

notes that all the other tiers experienced 

a positive change. Trading in sizes 

greater than the minimum quotation 

size occurred infrequently in these tiers 

both prior to and during the Pilot. 

FINRA further notes that the analysis 

of data from the second year of the Pilot 

also confirms its position that the 

impact of the change in the minimum 

quotation size on the market quality 

metrics generally is positive. FINRA 

staff analyzed the change in five 

measures to evaluate the impact of the 

Pilot on market quality—time-weighted 

quoted spreads, volume-weighted 

spreads, time-weighted quoted depth at 

the BBO, time-weighted quoted depth 

around the BBO, and price impact. 

Based on FINRA’s analysis, timeweighted quoted spreads continued to 

narrow during the first two years of the 

Pilot and these positive changes in timeweighted quoted spreads between the 

pre-Pilot and the first two years of the 

Pilot were statistically significant for all 

tiers.41 Similarly, volume-weighted 

spreads were unchanged (or slightly 

narrowed) for all tiers between the prePilot period and the first two years of 

the Pilot when accounting for the longer 

Pilot period. 

FINRA observes that the displayed 

depth decreased slightly for most tiers, 

but a consideration of depth beyond the 

BBO demonstrated that any declines 

were mostly statistically insignificant 

across tiers in the first two years of the 

Pilot. FINRA believes that consideration 

of depth beyond the BBO is a useful 

additional measure for assessing market 

depth. 

In addition, based on a data review 

using the same methodology as was 

employed for the 2013 Assessment, 

subsequent to the completion of the 

2013 Assessment, FINRA observed that 

the price impact of hypothetical market 

orders continued to remain lower 

during the second year of the Pilot 

period than during the pre-Pilot 

period.42 For example, the following 

two tables prepared by FINRA present 

the price impact for hypothetical market 

buy and sell orders with sizes five times 

larger than the minimum size 

requirement for each tier. The price 

impact associated with the hypothetical 

orders is estimated to have declined for 

all tiers, which is an indication of 

improved market quality. The decline is 

significant for all levels except for Tiers 

5b and 5c (for buy trades) and Tier 1 (for 

sell trades). 

According to FINRA, the t-statistic in 

the charts below is designed to measure 

whether the price impact associated 

with a trade of a given (relative) size is 

different between the pre-Pilot and Pilot 

sample periods. The difference is tested 

for significance by calculating the twosample un-pooled Student’s t-statistic, 

The null hypothesis (i.e., that price 

impact is unchanged between the two 

sample periods) is rejected at the 90% 

and 95% confidence levels, if the tstatistics are greater than 1.65 and 1.96, respectively. 

TABLE 5 

[Price impact for hypothetical large market buy orders] 

Tier Minimum quotation size change Number of 

stocks 

Pre-pilot 

(10/2011–10/ 

2012) 

Pilot 

(11/2012–7/ 

2014) 

Difference t-statistic 

1 ............. Increased ......................................................... 3,586 0.0055 0.0050 ¥0.0005 (2.60) 

2 ............. Maintained ....................................................... 1,254 0.0235 0.0197 ¥0.0038 (5.03) 

3 ............. Decreased ....................................................... 1,752 0.0506 0.0420 ¥0.0086 (6.41) 

4 ............. Decreased ....................................................... 1,537 0.0969 0.0810 ¥0.0159 (5.00) 


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38440 Federal Register / Vol. 83, No. 151 / Monday, August 6, 2018 / Notices 

43As noted in note 36, supra, FINRA points out 

that the DERA Memo to File finds that quoted and 

effective spreads for Tier 1 securities increased 

between the pre-Pilot period of November 14, 2011 

to October 31, 2012 and the Pilot period of 

November 12, 2012 to November 28, 2014 covered 

by the analysis, but it does not find sufficient 

evidence that these increases in spreads were 

caused by the Pilot. 

44See supra note 4. 

45 Id. 

46 Id. 

47 Id. 

48See FINRA Letter, supra note 7. 

49 Id. at 2. 

50 Id. 

51 In approving this rule change, the Commission 

has considered the rule’s impact on efficiency, 

competition, and capital formation. See 15 U.S.C. 

78c(f). 

52 15 U.S.C. 78o–3(b)(6). 

53 15 U.S.C. 78o–3(b)(11). 

TABLE 5—Continued 

[Price impact for hypothetical large market buy orders] 

Tier Minimum quotation size change Number of 

stocks 

Pre-pilot 

(10/2011–10/ 

2012) 

Pilot 

(11/2012–7/ 

2014) 

Difference t-statistic 

5a ........... Decreased ....................................................... 3,038 0.3295 0.2530 ¥0.0765 (7.79) 

5b ........... Decreased ....................................................... 2,026 1.1630 1.0661 ¥0.0969 (1.55) 

5c ........... Maintained ....................................................... 177 4.8322 4.7906 ¥0.0416 (0.06) 

TABLE 6 

Price impact for hypothetical large market sell orders 

Tier Minimum quotation size change Number of 

stocks 

Pre-pilot 

(10/2011–10/ 

2012) 

Pilot 

(11/2012–7/ 

2014) 

Difference t-statistic 

1 ............. Increased ......................................................... 3,931 0.0062 0.0059 ¥0.0003 (1.60) 

2 ............. Maintained ....................................................... 1,483 0.0233 0.0169 ¥0.0064 (3.41) 

3 ............. Decreased ....................................................... 1,787 0.0540 0.0311 ¥0.0229 (4.87) 

4 ............. Decreased ....................................................... 1,676 0.1214 0.0656 ¥0.0558 (4.95) 

5a ........... Decreased ....................................................... 3,059 0.4170 0.1500 ¥0.2670 (6.01) 

5b ........... Decreased ....................................................... 2,145 2.3563 0.4214 ¥1.9349 (6.79) 

5c ........... Maintained ....................................................... 288 14.8135 4.2683 ¥10.5452 (3.13) 

As noted above, FINRA states that the 

2013 Assessment was not conclusive as 

to the impact of the Pilot on market 

quality for Tier 1 securities, the only tier 

where the minimum quotation size had 

increased. For example, the 2013 

Assessment indicated that the timeweighted quoted spread was unchanged 

for Tier 1 securities in the Pilot period. 

However, FINRA explains that from 

June 30, 2013 to July 2014, there was a 

statistically significant narrowing of 

time-weighted quoted spreads in this 

tier. Evidence from the second year of 

the Pilot suggests that volume-weighted 

effective spreads and depth beyond the 

BBO were unchanged from pre-Pilot 

levels, but there was a statistically 

significant increase in depth at the BBO. 

FINRA therefore concludes that the 

updated analysis provides reliable 

evidence that market quality for Tier 1 

securities also has improved during the 

Pilot.43 The data for other tiers, 

however, continue to provide reliable 

evidence that market quality has been 

unchanged or slightly improved under 

the Pilot. Thus, because the Pilot had a 

demonstrable positive impact on 

customer limit order display, and 

appears to have had an overall neutral 

to positive impact on market quality, 

FINRA believes that it is appropriate 

and in the best interest of investors to 

adopt the Pilot tiers as permanent. 

FINRA notes that, if the Commission 

approves the proposed rule change, the 

implementation date of the proposed 

rule change shall be the date of approval 

by the Commission. 

III. Comment Summary and FINRA’s 

Response 

As noted above, the Commission 

received one comment letter on the 

proposed rule change and a response 

letter from FINRA.44 The commenter 

generally supports making the proposed 

tier sizes permanent.45 However, the 

commenter believes that there should be 

no tier sizes for unsolicited customer 

orders.46 The commenter is concerned 

that when a broker-dealer is quoting on 

an unsolicited basis in certain 

securities, the tier sizes work to restrict 

customers from being able to trade their 

positions because the unsolicited 

customer order does not meet the 

revised tier size requirements.47

In its response letter, FINRA states 

that one of its goals in revising FINRA 

Rule 6433 was to achieve a reasonable 

balance between customer limit order 

display and facilitating a meaningful 

minimum dollar-value commitment to 

the market for all displayed 

quotations.48 FINRA believes that the 

Pilot tiers achieve an appropriate 

balance of these objectives.49 FINRA 

further explains that the Pilot tiers have 

resulted in a positive impact on the 

level of customer limit orders eligible 

for display under FINRA Rule 6460 and 

does not believe that an exception for 

any subset of customer orders should be 

adopted at this time.50

IV. Discussion of Commission Findings 

After careful review of the proposed 

rule change, the comment letter, and 

FINRA’s response to the comment letter, 

the Commission finds that the proposal 

is consistent with the requirements of 

the Act and the rules and regulations 

thereunder that are applicable to a 

national securities association.51

Specifically, the Commission finds that 

the rule change is consistent with 

Section 15A(b)(6) of the Exchange Act,52

which requires, among other things, that 

FINRA rules be designed to prevent 

fraudulent and manipulative acts and 

practices, to promote just and equitable 

principles of trade, and, in general, to 

protect investors and the public interest. 

The Commission also finds that the 

proposed rule change is consistent with 

the provisions of Section 15A(b)(11) of 

the Act,53 which requires that FINRA 

rules include provisions governing the 

form and content of quotations relating 

to securities sold otherwise than on a 

national securities exchange which may 

be distributed or published by any 


sradovich on DSK3GMQ082PROD with NOTICES
Federal Register / Vol. 83, No. 151 / Monday, August 6, 2018 / Notices 38441 

54See Order Approving Tier Size Pilot, supra 

note 10, 77 FR at 37466. 

55See id. at 37469. 

56See id. at 37469 n.168 (citing, among other 

things, the Commission’s 1996 Order Handling 

Rules Release). 

57See supra note 4. 

58See id. at 2. 

59 Id. The minimum quotation size requirement 

increased for those securities prices between 

$0.0001 and $0.0999. These securities are included 

in the lowest tier which requires a minimum 

quotation size of 10,000 shares. 

60 15 U.S.C. 78s(b)(2). 

61 17 CFR 200.30–3(a)(12). 

member or person associated with a 

member, and the persons to whom such 

quotations may be supplied. 

As stated in the Notice, FINRA 

believes that making the Pilot tiers 

permanent would promote just and 

equitable principles of trade and protect 

investors and the public interest. FINRA 

believes that the 2013 Assessment and 

subsequent observations demonstrate 

that the Pilot has resulted in an 

increased display of customer limit 

orders. FINRA notes that the 2013 

Assessment found a 13% increase in the 

number of customer limit orders that 

met the minimum quotation sizes 

eligible for display across all Pilot tiers, 

and FINRA’s updated data through July 

2014 shows an even greater increase of 

18.45% than otherwise would have 

been eligible for display. The increase in 

customer limit orders eligible for 

display was significant in tiers that 

make up substantial percentages of the 

overall volume transacted in OTC equity 

securities. 

In the Notice, FINRA further states its 

belief that any concerns about market 

quality raised by public commenters 

prior to the Commission’s approval of 

the Pilot have not materialized. In fact, 

FINRA states that it believes that the 

Pilot has had a positive impact on OTC 

market quality for the majority of OTC 

equity securities and the tiers set forth 

in the Pilot. FINRA believes that the 

Pilot data shows overall a slight 

reduction in spreads for most OTC 

equity securities with no negative (and 

perhaps a positive) impact on liquidity. 

When the Commission approved the 

Pilot, it emphasized the potential 

benefit of increasing customer limit 

order display. For instance, the 

Commission noted that increased limit 

order display potentially could improve 

the prices at which customer limit 

orders would be executed, consistent 

with the protection of investors and the 

public interest.54 The Commission also 

stated its belief that greater customer 

limit order display could increase quote 

competition, narrow spreads, and 

increase the likelihood of price 

improvement for OTC equity 

securities.55 The Commission has 

maintained a longstanding view that 

there are benefits to promoting customer 

limit order display.56

As noted above, the sole commenter 

on the proposed rule change is 

concerned that when a firm is quoting 

on an unsolicited basis in certain 

securities, the Pilot tier sizes work to 

restrict customers from being able to 

trade their positions if the unsolicited 

customer order does not meet FINRA’s 

minimum tier size requirements.57 The 

Commission notes that FINRA’s 2013 

Assessment and its subsequent 

assessment for the period covering July 

1, 2013 through July 31, 2014 indicate 

that there was a meaningful increase in 

the number of customer limit orders 

eligible for display. The Commission 

agrees with FINRA that the minimum 

tier size requirements of FINRA Rule 

6433, which have been in place on a 

Pilot basis, achieve a reasonable balance 

between fostering customer limit order 

display and facilitating a meaningful 

minimum dollar-value commitment to 

the market for all displayed quotations. 

The Commission believes that the 

Pilot has accomplished its intended 

objectives and has realized its 

anticipated benefits, including greater 

customer limit order display. At the 

same time, market quality indicators 

during the Pilot suggest that the revised 

tiers and evidence of greater customer 

limit order display did not result in a 

harmful reduction in liquidity for OTC 

equity securities. The Commission 

believes that these results are consistent 

with FINRA’s assessment that the Pilot 

has had a neutral to positive impact on 

liquidity for the majority of OTC equity 

securities and price tiers.58 At the same 

time, the Commission notes that there is 

inconclusive evidence regarding the 

effects of the Pilot on liquidity for the 

price tier for which the minimum 

quotation size requirement was 

increased.59 In light of the foregoing, the 

Commission believes that it is 

consistent with the Act to adopt the 

Pilot tiers, which have been in effect for 

nearly six years, on a permanent basis. 

IV. Conclusion 

It is therefore ordered pursuant to 

Section 19(b)(2) 60 of the Exchange Act 

that the proposal (SR–FINRA–2018– 

015) be and hereby is approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.61

Robert W. Errett, 

Deputy Secretary. 

[FR Doc. 2018–16724 Filed 8–3–18; 8:45 am] 

BILLING CODE 8011–01–P 

SOCIAL SECURITY ADMINISTRATION 

[Docket No: SSA–2018–0044] 

Agency Information Collection 

Activities: Proposed Request and 

Comment Request 

The Social Security Administration 

(SSA) publishes a list of information 

collection packages requiring clearance 

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Budget (OMB) in compliance with 

Public Law 104–13, the Paperwork 

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date of this notice. To be sure we 

consider your comments, we must 

receive them no later than October 5, 

2018. Individuals can obtain copies of 

the collection instruments by writing to 

the above email address. 

1. Certificate of Support—20 CFR 

404.370, 404.750, 404.408a—0960– 

0001. A parent of a deceased, fully 

insured worker may be entitled to Social 

Security Old-Age, Survivors, and 

Disability Insurance (OASDI) benefits 

based on the earnings record of the 

deceased worker under certain 

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parent receives at least one-half support 

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spousal applicant in determining 


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