Federal Register / Vol. 86, No. 109 / Wednesday, June 9, 2021 / Notices 30663 

10 15 U.S.C. 78s(b)(3)(A)(ii). 

11 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Exchange Act Release No. 90067 (October 1, 

2020), 85 FR 63314 (‘‘Notice’’). Comments on the 

proposed rule change can be found at: https:// 

Continued 

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

Inter-Market Competition 

The proposal does not impose an 

undue burden on inter-market 

competition. The Exchange believes its 

proposal remains competitive with 

other options markets and will offer 

market participants with another choice 

of where to transact options. The 

Exchange notes that it operates in a 

highly competitive market in which 

market participants can readily favor 

competing venues if they deem fee 

levels at a particular venue to be 

excessive, or rebate opportunities 

available at other venues to be more 

favorable. In such an environment, the 

Exchange must continually adjust its 

fees to remain competitive with other 

options exchanges. Because competitors 

are free to modify their own fees in 

response, and because market 

participants may readily adjust their 

order routing practices, the Exchange 

believes that the degree to which fee 

changes in this market may impose any 

burden on competition is extremely 

limited. 

Intra-Market Competition 

Options 7, Section 1 

The Exchange’s proposal to relocate 

rule text related to the Removal of Days 

for Purposes of Pricing Tiers within 

Options 7, Section 2(6) into Options 7, 

Section 1, General Provisions, without 

change, does not impose an undue 

burden on competition as the rule text 

will continue to apply uniformly to all 

Participants. 

Options 7, Section 2 

The Exchange’s proposal to adopt 

Block Order Mechanism and Customer 

Cross Order pricing does not impose an 

undue burden on competition as no 

Participant would be subject to any fees 

or be paid any rebates for orders 

executed into the Block Order 

Mechanism or Customer Cross Orders. 

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.10 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– 

BX–2021–025 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–BX–2021–025. 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; 

the Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. 

All submissions should refer to File 

Number SR–BX–2021–025 and should 

be submitted on or before June 30, 2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

J. Matthew DeLesDernier,

Assistant Secretary. 

[FR Doc. 2021–12032 Filed 6–8–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–92105; File No. SR–FINRA– 

2020–031] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Order Granting 

Approval of a Proposed Rule Change, 

as Modified by Amendment No. 2, To 

Adopt Proposed Rule 6439 

(Requirements for Member Inter-Dealer 

Quotation Systems) and Rescind the 

Rules Related to the OTC Bulletin 

Board Service 

June 3, 2021. 

I. Introduction

On September 24, 2020, the 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’’ 

or ‘‘Exchange Act’’) 1 and Rule 19b–4 

thereunder,2 a proposed rule change to 

rescind the rules related to the OTC 

Bulletin Board Service and cease its 

operation and to adopt new 

requirements for member inter-dealer 

quotation systems that disseminate 

quotations in equity securities traded 

over-the-counter (‘‘OTC’’). The proposed 

rule change was published for comment 

in the Federal Register on October 7, 

2020.3 On November 4, 2020, pursuant 


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www.sec.gov/comments/sr-finra-2020-031/ 

srfinra2020031.htm. 

4 15 U.S.C. 78s(b)(2). 

5See Exchange Act Release No. 90335 (November 

4, 2020). The Commission designated January 5, 

2021, as the date by which the Commission shall 

approve or disapprove, or institute proceedings to 

determine whether to approve or disapprove, the 

proposed rule change. 

6Amendment No. 1 may be found at: https://

www.sec.gov/comments/sr-finra-2020-031/ 

srfinra2020031-8841399-238269.pdf. 

7 15 U.S.C. 78s(b)(2)(B). 

8See Exchange Act Release No. 90824, 86 FR 653 

(January 6, 2021). 

9See Securities Exchange Act Release No. 91474, 

86 FR 18583 (April 9, 2021). 

10Amendment No. 2 is a partial amendment in 

which FINRA added a representation that the 

effective date for deleting the rules related to the 

OTCBB (as defined herein) will not occur until: (1) 

Proposed Rule 6439 (except for Rule 6439(d)(1)(B)) 

is effective; and (2) the Commission grants FINRA’s 

request set forth in the QEQS Designation Request 

Letter (as defined herein) (or FINRA files a rule 

filing otherwise setting the implementation date for 

deleting the rules related to the OTCBB and the 

Commission approves such rule filing, if required). 

Because Amendment No. 2 to the proposed rule 

clarifies the timing of effectiveness of the proposed 

rule change and does not materially alter the 

substance of the proposed rule change, Amendment 

No. 2 is not subject to notice and comment. 

Amendment No. 2 may be found at: https://

www.sec.gov/comments/sr-finra-2020-031/ 

srfinra2020031.htm. 

11See Letters from Christopher Bok, Chief 

Compliance Officer, OTC Link, LLC, dated October 

28, 2020 (‘‘OTC Link Letter 1’’); Kimberly Unger, 

CEO and Executive Director, The Security Traders 

Association of New York, Inc., dated October 28, 

2020 (‘‘STANY Letter’’); Sherry J. Sandler, Global 

OTC, dated November 9, 2020 (‘‘Global OTC 

Letter’’), and Cass Sanford, Associate General 

Counsel, OTC Markets Group, Inc., dated January 

27, 2021 (‘‘OTC Link Letter 2’’). 

12See Letters from Racquel Russell, Associate 

General Counsel, FINRA, dated November 20, 2020 

(‘‘FINRA Letter 1’’) and February 12, 2021 (‘‘FINRA 

Letter 2’’). 

13FINRA Rule 6420(c) defines ‘‘inter-dealer 

quotation system’’ as ‘‘any system of general 

circulation to brokers or dealers which regularly 

disseminates quotations of identified brokers or 

dealers.’’ This definition tracks the Commission’s 

definition of the same term in Exchange Act Rule 

15c2–11, 17 CFR 240.15c2–11. 

14The term ‘‘OTC Equity Security’’ is defined in 

FINRA Rule 6420(f) as any equity security that is 

not an ‘‘NMS stock’’ as that term is defined in Rule 

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

that the term ‘‘OTC Equity Security’’ shall not 

include any Restricted Equity Security. The term 

‘‘Restricted Equity Security’’ is further defined in 

FINRA Rule 6420(k) to mean any equity security 

that meets the definition of ‘‘restricted security’’ as 

contained in Rule 144(a)(3) under the Securities Act 

of 1933. 

15See Notice, supra note 3, at 63315. 

16See id. 

17See id. 

18See id. 

19See id. at 63318. For example, FINRA states 

that where investors look to feeds that solely 

disseminate OTCBB data for quotation information 

on a particular OTC Equity Security, investors 

mistakenly may conclude that there are no current 

quotations in the security (when, in fact, there may 

be numerous quotations available elsewhere—i.e., 

on member-operated IDQSs). See id. 

20Section 17B(b)(1) of the Act, which was added 

by the Securities Enforcement Remedies and Penny 

Stock Reform Act of 1990 (‘‘Penny Stock Act’’), 

directs the Commission to ‘‘facilitate the 

widespread dissemination of reliable and accurate 

last sale and quotation information with respect to 

penny stocks . . . with a view toward establishing, 

at the earliest feasible time, one or more automated 

quotation systems that will collect and disseminate 

information regarding all penny stocks.’’ 15 U.S.C. 

78q–2(b)(1). Under Exchange Act Rule 3a51–1, 

‘‘penny stock’’ is a non-NMS stock that among other 

things, does not include securities that have a price 

of five dollars or more as determined either on a 

per transaction basis or, in the absence of a 

transaction, on the basis of the inside bid quotation 

for the security displayed on an automated 

interdealer quotation system that has the 

characteristics set forth in Section 17B(b)(2) of the 

Act or such other automated interdealer system that 

is designated by the Commission for purposes of the 

rule (such a system, a ‘‘Qualifying Electronic 

Quotation System’’ or ‘‘QEQS’’). See 17 CFR 

240.3a51–1; Exchange Act Release No. 30608 (April 

20, 1992), 57 FR 18004 (April 28, 1992) (‘‘Penny 

Stock Rules Adopting Release’’); 17 CFR 240.3a51– 

1, 15g–1 through 15g–9 and 15g–100 (‘‘Penny Stock 

Rules’’). The Commission, in adopting the Penny 

Stock Rules, set forth standards it would consider 

when designating a QEQS. See Penny Stock Rules 

Adopting Release, 57 FR at 18012 n.64. The QEQS 

designation criteria set forth in the Penny Stock 

Rules are based on the Exchange Act Section 17B 

characteristics of an automated quotation system 

that would facilitate the widespread dissemination 

of reliable and accurate last sale and quotation 

information with respect to penny stocks. See 15 

U.S.C. 78q–2(b)(1) and (2). In 1992, the Commission 

designated the OTCBB, then operated by FINRA’s 

predecessor the National Association of Securities 

Dealers, Inc. (‘‘NASD’’), as an automated interdealer 

quotation system and a QEQS for purposes of the 

Penny Stock Rules. See Letter from Margaret H. 

McFarland, Deputy Secretary, Commission, to 

Richard Ketchum, Executive Vice President, NASD, 

Inc., dated December 30, 1992 (‘‘OTCBB 

Designation Letter’’). The Commission thereafter 

granted the NASD’s request for an extension of 

QEQS status. See Securities Exchange Act Release 

No. 38101 (Dec. 31, 1996), 62 FR 1010 (Jan. 7, 

1997). 

to Section 19(b)(2) of the Act,4 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.5 On December 

21, 2020, FINRA filed Amendment No. 

1 to the proposed rule change.6 On 

December 30, 2020, the Commission 

published notice of Amendment No. 1 

and instituted proceedings pursuant to 

Section 19(b)(2)(B) of the Act 7 to 

determine whether to approve or 

disapprove the proposed rule change.8

On April 5, 2021, the Commission 

extended the period for consideration of 

the proposed rule change to June 4, 

2021.9 On June 1, 2021, FINRA filed 

Amendment No. 2 to the proposed rule 

change, which replaces and supersedes 

Amendment No. 1 in its entirety.10 The 

Commission received four comment 

letters regarding the proposed rule 

change,11 and two responses to 

comments from FINRA.12 This order 

approves the proposed rule change, as 

modified by Amendment No. 2. 

II. Summary of the Proposal, as 

Modified by Amendment No. 2 

As further described below, FINRA 

proposes to (i) rescind FINRA’s rules 

governing the OTC Bulletin Board 

Service (‘‘OTCBB’’) and cease its 

operation; and (ii) adopt new Rule 6439 

(Requirements for Member Inter-Dealer 

Quotation Systems) to expand the 

obligations of member interdealer 

quotation systems (‘‘IDQSs’’) 13 that 

disseminate quotation updates on a realtime basis in OTC Equity Securities.14

A. Rescission of Rules Governing the 

OTCBB 

The OTCBB is a FINRA-operated 

IDQS available for use by broker-dealers 

to publish quotations in eligible OTC 

Equity Securities.15 FINRA has operated 

the OTCBB since 1990.16 FINRA states 

that, due to technological advancements 

since 1990 and the increase in 

alternative electronic venues with more 

extensive functionality than the OTCBB, 

the level of quotation activity occurring 

on the OTCBB has continued to decline 

over the past several years and is now 

nonexistent.17 FINRA represents that, as 

of the date that it filed the proposed rule 

change, the OTCBB does not display or 

widely disseminate quotation 

information on any OTC Equity 

Security.18

FINRA states that it does not believe 

that continued operation of the OTCBB 

serves any benefit to investors or the 

marketplace and that ceasing operation 

of the OTCBB would eliminate potential 

investor confusion regarding the 

availability of quotation information for 

OTC Equity Securities.19 In addition, 

FINRA states that it does not believe 

that the OTCBB, in its current state, 

furthers the goals and objectives of 

Section 17B of the Act and, therefore, 

does not meet the characteristics of a 

system described in Section 17B of the 

Act regarding the widespread 

dissemination of reliable and accurate 

quotation information with respect to 

‘‘penny stocks.’’ 20

As a result, FINRA proposes to 

rescind the FINRA Rule 6500 Series, 

which governs the operation of the 

OTCBB. Among other things, the FINRA 

Rule Series 6500 contains provisions 

regarding the securities eligible to be 

quoted on the OTCBB (FINRA Rule 

6530), market maker obligations on the 

OTCBB (FINRA Rule 6540), and 

transaction reporting (FINRA Rule 

6550). FINRA also proposes to rescind 

FINRA Rule 7720, which sets forth the 

fees applicable to a broker-dealer that 

displays quotations or trading interest in 

the OTCBB, and to amend FINRA Rule 


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21See Amendment No. 2, supra note 10. See also 

infra notes 46–47 and accompanying text. 

22See Notice, supra note 3, at 63320. 

23 Id. at 63316. 

24FINRA currently has in place rules that govern 

the activity of member firms when they engage in 

quoting OTC Equity Securities. Specifically, the 

FINRA Rule 6400 Series (Quoting and Trading in 

OTC Equity Securities), among other things, 

provides a regulatory framework that governs the 

form and content of OTC Equity Securities’ 

quotations, and the FINRA Rule 5200 Series sets 

forth rules of general applicability that govern 

quoting and trading practices in this market sector 

(hereinafter, the FINRA Rule Series 6400 and 5200 

are collectively referred to as the ‘‘FINRA Quotation 

Governance Rules’’). See Notice, supra note 3, at 

63314–15. Rather than governing the activity of 

member firms, like the FINRA Quotation 

Governance Rules, proposed Rule 6439 would 

provide quotation governance standards for member 

IDQSs on or through which quotations are 

displayed. 

25See supra note 20. 

26For example, FINRA states that a member IDQS 

would be required to address in its procedures its 

methodology for ranking quotations, including at a 

minimum, addressing factors such as price 

(including any applicable quote access fee), size, 

time, capacity and type of quotation (such as 

unpriced quotes and bid/offer wanted quotations). 

The member IDQS also would be required to 

include any other factors relevant to the ranking 

and display of quotations (e.g., reserve sizes, 

quotation updates, treatment of closed quotations, 

and quotation information imported from other 

systems). See Notice, supra note 3, at 63316. 

27FINRA states that a member that is an IDQS at 

the time of the effective date of this proposed rule 

change would be required to prominently disclose 

the required information to its subscribers upon the 

effective date of the proposed rule change and, 

thereafter, within five business days of the 

implementation of any material update, 

modification or revision thereto. See id., at n.16. 

28FINRA states that this proposed requirement is 

consistent with the ‘‘fair access’’ requirements of 

Regulation ATS but would apply to quoting and 

trading in all OTC Equity Securities on the member 

IDQS, regardless of the percentage of average daily 

volume that such member IDQS had in the security. 

See 17 CFR 242.301(b)(5). FINRA states that while 

certain member IDQSs may already be subject to the 

similar volume-based fair access requirements 

under Regulation ATS, proposed Rule 6439 would 

ensure the application of fair access requirements 

to all member IDQSs. See Notice, supra note 3, at 

63316. 

29See id. at 63316–17. See also supra note 27. 30See proposed Rule 6439(b). 31FINRA Rule 5220 and its associated 

Supplementary Material set forth members’ firm 

quote obligations. Specifically, FINRA Rule 5220 

provides that no member shall make an offer to buy 

from or sell to any person any security at a stated 

price unless such member is prepared to purchase 

or sell, as the case may be, at such price and under 

such conditions as are stated at the time of such 

offer to buy or sell. 

32See Notice, supra note 3, at 63317. 33FINRA states that following Commission 

approval, FINRA would announce in a Regulatory 

Notice details about the required manner and 

timing of the submission of this information to 

FINRA. See Notice, supra note 3, at 63317, n.27. 

9217 (Violations Appropriate for 

Disposition Under Plan Pursuant to SEA 

Rule 19d–1(c)(2)) to remove reference to 

FINRA Rule 6550 (Transaction 

Reporting). While these proposed 

changes to the FINRA rulebook would 

cause the operation of the OTCBB to 

terminate, FINRA states that it would 

not cease operation of the OTCBB until: 

(1) Proposed Rule 6439 (except for 

proposed Rule 6439(d)(1)(B)) is 

effective, and (2) the Commission grants 

FINRA’s request set forth in the QEQS 

Designation Request Letter (or FINRA 

files a rule filing otherwise setting the 

implementation date for deleting the 

rules related to the OTCBB and the 

Commission approves such rule filing, if 

required).21

B. Proposed Rule 6439 (Requirements 

for Member Inter-Dealer Quotation 

Systems) 

FINRA states that all quotation 

activity in OTC Equity Securities now 

occurs on member-operated IDQSs, 

rather than the OTCBB.22 FINRA 

proposes, in conjunction with the 

cessation of the OTCBB, to adopt new 

requirements for member IDQSs that 

provide quotations in OTC Equity 

Securities in order to ensure that they 

have minimum standards in place.23

FINRA states that it believes that the 

proposed requirements would 

complement the existing framework 

governing the form and content of 

quotations 24 and are consistent with the 

goals and objectives of Section 17B of 

the Act regarding the facilitation of 

widespread dissemination of reliable 

and accurate quotation information in 

penny stocks.25

Proposed Rule 6439 would apply to 

member IDQSs (whether or not such 

member is also an alternative trading 

system (‘‘ATS’’)) that permit quotation 

updates on a real-time basis in OTC 

Equity Securities. Under proposed Rule 

6439(a), member IDQSs 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 their systems. Such written 

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.26 Member IDQSs must 

also prominently disclose these written 

policies and procedures, along with any 

material updates, modifications and 

revisions thereto, to subscribers within 

five business days following the date of 

establishment of a policy or procedure 

or implementation of a material change, 

as well as provide them to prospective 

subscribers upon request.27

Under proposed Rule 6439(b), 

member IDQSs must establish nondiscriminatory written standards for 

granting access to quoting and trading in 

OTC Equity Securities on their systems 

that do not unreasonably prohibit or 

limit any person with respect to access 

to services offered by such member 

IDQS.28 As with the requirements under 

proposed Rule 6439(a), member IDQSs 

would be required to prominently 

disclose these written standards relating 

to fair access, and any material updates, 

modifications and revisions thereto, to 

their subscribers within five business 

days following the date of establishment 

of written standards or implementation 

of a material change, as well as provide 

them to prospective subscribers upon 

request.29 In addition, member IDQSs 

would be required to make and keep 

records of all grants of access and all 

denials or limitations of access. Such 

records must include, for all 

subscribers, the reasons for granting 

access, and, for all denials or limitations 

of access, the reasons for denying or 

limiting such access.30

Proposed Rules 6439(c) and (d) would 

apply only to member IDQSs that do not 

automatically execute all orders 

presented for execution against 

displayed quotations for which a 

member subscriber has an obligation 

under FINRA Rule 5220 (Offers at 

Stated Prices) 31 (such a system is 

hereafter referred to as a ‘‘non-autoexecuting member IDQS’’). Under 

proposed Rule 6439(c), non-autoexecuting member IDQSs must 

establish, maintain and enforce written 

policies and procedures that are 

reasonably designed to address 

instances of unresponsiveness to orders 

in an OTC Equity Security. At a 

minimum, these policies and 

procedures must specify an efficient 

process for: (i) Monitoring subscriber 

unresponsiveness; (ii) subscribers to 

submit complaints to the non-autoexecuting member IDQS regarding 

potential instances of order 

unresponsiveness; (iii) documenting the 

subscriber’s rationale for 

unresponsiveness; and (iv) determining 

specified steps when an instance of, or 

repeated, order unresponsiveness may 

have occurred.32

Under proposed Rule 6439(d), nonauto-executing member IDQSs must 

report to FINRA, in a form and manner 

prescribed by FINRA,33 certain 

aggregate and order-level information in 

OTC Equity Securities. Specifically, 

proposed Rule 6439(d)(1)(A) would 

require a non-auto-executing member 

IDQS to report to FINRA on a monthly 

basis the following aggregated 

information, categorized by FINRA 


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34FINRA states that in this context, a ‘‘marketable 

order’’ refers to a message presented against a 

market maker’s quote that is priced to be 

immediately executable. See id., n.29. 

35See proposed Rule 6439(d)(1)(A). 

36See proposed Rule 6439(d)(1)(B). 

37See proposed Rule 6439(d)(2). If such 

information is reportable to the CAT pursuant to 

FINRA Rule 6830, this information will be available 

to FINRA. Thus, separate reporting pursuant to 

proposed FINRA Rule 6439(d) would be 

duplicative. 

38See proposed Rule 6439(e). 

39FINRA would announce in a Regulatory Notice 

the methods and process by which members may 

provide systems disruption notifications to FINRA. 

See Notice, supra note 3, at 63318. 

40See proposed Rule 6439(f). 

41 17 CFR 242.1002(b). 

42See Notice, supra note 3, at 63318. 

43See id. 

44See id. 

45See Notice, supra note 3, at 63319. 

46FINRA states that proposed Rule 6439, with 

one exception related to the reporting to FINRA of 

order-level information, will become effective at the 

same time or prior to the rescission of the OTCBB 

rules. FINRA states that paragraph (d)(1)(B) of 

proposed Rule 6439 (requiring reporting of 

specified order-level information) may be phased at 

a later date within the 365-day timeframe to allow 

FINRA to better coordinate with the timeline for 

reporting information in OTC Equity Securities to 

the CAT under FINRA Rule 6830 (Industry Member 

Data Reporting). See Amendment No. 2, supra note 

10. 

47See infra note 66. 

48See id. 

49See Notice, supra note 3, at 63316, n.17. 

50 In approving this proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

formation. See 15 U.S.C. 78c(f). 

51 15 U.S.C. 78o–3(b)(6). 

member subscriber market participant 

identifier (MPID) across all symbols 

quoted by the MPID during the previous 

calendar month: (i) Total number of 

marketable orders presented for 

execution against the MPID’s 

quotation; 34 (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 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).35

Proposed Rule 6439(d)(1)(B) would 

require non-auto-executing member 

IDQSs to provide to FINRA the 

following order-level information for 

each order presented against an MPID’s 

quotation during the previous calendar 

month: (i) Buy/sell; (ii) security symbol; 

(iii) price; (iv) size; (v) All or None 

indicator (yes or no); (vi) order entry 

firm MPID; (vii) order receipt time; (viii) 

time in force; (ix) response time; (x) 

order response (e.g., execute, reject 

cancel, etc.); (xi) executed quantity; (xii) 

system-generated order number (if any); 

and (xiii) position in queue for quote 

(e.g., IL1, IL2).36 However, to the extent 

that the above order-level information is 

or becomes reportable under the 

Consolidated Audit Trail (‘‘CAT’’) 

pursuant to FINRA Rule 6830 (Industry 

Member Data Reporting), non-autoexecuting member IDQSs would not be 

required to report this order-level 

information under proposed Rule 

6439(d)(1)(B).37

Proposed Rule 6439(e) would require 

each member IDQS to make available to 

customers on its website (or its affiliate 

distributor’s website) a written 

description of each OTC Equity Security 

order- or quotation-related data product 

offered by such member IDQS and 

related pricing information, including 

fees, rebates, discounts and crossproduct pricing incentives. Member 

IDQSs would be required to keep the 

relevant website page(s) accurate and 

up-to-date with respect to the required 

data product descriptions and pricing 

information and to make such 

information available at least two 

business days in advance of offering a 

data product.38 Proposed Rule 6439(e) 

would specify that a member IDQS is 

not precluded from negotiating lower 

fees with customers, provided that the 

member IDQS discloses on such website 

page(s) the circumstances under which 

it may do so. 

Finally, under proposed Rule 6439(f), 

a member IDQS must provide FINRA 

with prompt notification when it 

reasonably becomes aware of any 

systems disruption that is not de 

minimis that degrades, limits, or 

otherwise impacts the member IDQS’s 

functionality with respect to trading or 

the dissemination of market data.39

Such notification must include, on a 

reasonable best efforts basis, a brief 

description of the event, its impact, and 

the member IDQS’s resolution efforts.40

FINRA states that, to comply with this 

requirement, a member IDQS that is an 

SCI ATS, as defined in Rule 1000 of 

Regulation SCI, could provide FINRA 

with the same information (or a 

duplicate copy of any notification) 

submitted to the Commission as 

required under Regulation SCI Rule 

1002(b) 41 promptly after filing the 

notification with the Commission.42

FINRA states that, if a member IDQS is 

not an SCI ATS, it could comply with 

this requirement by providing FINRA 

prompt notification when it reasonably 

becomes aware of any such systems 

disruption, and by providing periodic 

updates on the event and its 

resolution.43 Such notifications would 

include, on a reasonable best efforts 

basis, a brief description of the event, its 

impact, and resolution efforts.44

FINRA states that, if the proposed rule 

change is approved by the Commission, 

FINRA will announce in a Regulatory 

Notice the effective date(s) of the 

proposed rule change, which may be 

phased in but will be no later than 365 

days following Commission approval.45

Notwithstanding the foregoing, the 

effective date for rescinding the rules 

related to the OTCBB will not occur 

until: (1) Proposed Rule 6439 (except for 

Rule 6439(d)(1)(B)) is effective,46 and (2) 

the Commission grants FINRA’s request 

set forth in the QEQS Designation 

Request Letter 47 (or FINRA files a rule 

filing otherwise setting the 

implementation date for deleting the 

rules related to the OTCBB and the SEC 

approves such rule filing, if required).48

FINRA also states that it will examine 

for compliance by member IDQSs with 

proposed Rule 6439, including by 

reviewing the adequacy of member 

IDQSs’ written policies and procedures 

and written fair access standards 

required under the proposal, conducting 

a targeted exam of impacted member 

IDQSs after the initial effectiveness of 

the rule, and will incorporate a Rule 

6439 review as part of the regular exam 

program for impacted member firms.49

III. Discussion and Commission 

Findings 

After carefully reviewing the 

proposed rule change, as modified by 

Amendment No.2, the comment letters, 

and the FINRA letters, the Commission 

finds that the proposed rule change is 

consistent with the requirements of the 

Act and the rules and regulations 

thereunder applicable to a national 

securities association.50 In particular, 

the Commission finds that the proposed 

rule change is consistent with Section 

15A(b)(6) of the Act,51 in that it is 

designed, among other things, 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. In addition, the 

Commission finds that the proposed 

rule change is consistent with Section 

15A(b)(11) of the Act, in that it includes 

provisions governing the form and 

content of quotations relating to 

securities sold otherwise than on a 

national securities exchange which may 


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52 15 U.S.C. 78o–3(b)(11). 

53 15 U.S.C 78q–2(b)(1). 

54See supra notes 18 and 22 and accompanying 

text. 

55See Notice, supra note 3, at 63318. 

56See OTC Link Letter 1 and STANY Letter, 

supra note 11. 

57See STANY Letter, supra note 11, at 1; OTC 

Link Letter 1, supra note 11, at 1. 

58See Securities Exchange Act Release Nos. 

89891 (September 16, 2020), 85 FR 68124, 68185– 

86 (October 27, 2020) (‘‘Exchange Act Rule 15c2– 

11 Release’’). The Commission uses three sources of 

data on OTC securities. OTC Markets Group’s ‘‘Endof-Day Pricing Service’’ and ‘‘OTC Security Data 

File’’ provide closing trade and quote data for the 

U.S. OTC equity market and include identifying 

information for securities and issuers. The 

Commission also uses information from the weekly 

OTC Markets Group’s ‘‘OTC Company Data File.’’ 

Company Data Files include information about 

issuer reporting, shell, and bankruptcy status, as 

well as the SEC Central Index Key (CIK) identifier 

and whether an issuer’s financial statements are 

audited. See id., at 68185, n.640. 

59While this data may include OTC securities 

that are restricted securities and thus outside of the 

scope of FINRA’s definition of OTC Equity 

Securities, the Commission believes that the data is 

reasonably representative of quoting and trading 

activity in OTC Equity Securities. 60See id. at 68185. The number of securities 

quoted includes those securities with published 

priced and unpriced quotations. The Commission 

estimated that approximately seven percent of 

quoted OTC securities did not have priced 

quotations. See id. at 68185, n.641. 61See Broker-Dealer Directory, OTC Markets 

Group. Inc., https://www.otcmarkets.com/otc-link/ 

broker-dealer-directory (last visited Apr. 19, 2021, 

2:16 p.m.). The Commission expects that not all of 

the broker-dealers included in the directory are 

actively engaged in quoting OTC securities. See also 

Exchange Act Rule 15c2–11 Release, supra note 58, 

at 68184. 

62See Exchange Act Rule 15c2–11 Release, supra 

note 58, at 68185. 

63See id. at 68185, n.640. The Commission 

believes that OTC Markets Group data are 

reasonably representative of all OTC quoting and 

trading activity in the U.S. OTC equities market. 

See id. 

64See supra note 18 and accompanying text. 

65See Amendment No. 2, supra note 10. 

66As noted above, the Commission previously 

designated the OTCBB as an automated interdealer 

quotation system and QEQS for purposes of the 

Penny Stock Rules. Historically, the universe of 

securities quoted on the OTCBB included penny 

stocks as well as higher priced OTC Equity 

Securities. See OTCBB Designation Letter, supra 

note 20. FINRA has stated that it intends to request 

that the Commission designate the FINRA OTC 

Reporting Facility (see infra note 109 and 

accompanying text), together with any FINRAmember IDQS, as a QEQS for purposes of the Penny 

Stock Rules (‘‘QEQS Designation Request Letter’’). 

See Notice, supra note 3, at 63116, n.15; 

Amendment No. 2, supra note 10. 

be distributed or published by any 

member or person associated with a 

member, and the persons to whom such 

quotations may be supplied, and that 

such rules are designed to produce fair 

and informative quotations, to prevent 

fictitious or misleading quotations, and 

to promote orderly procedures for 

collecting, distributing, and publishing 

quotations.52 The Commission also 

finds that the proposal is consistent 

with Section 17B(b)(1) of the Act in that 

it is designed to facilitate the 

widespread dissemination of reliable 

and accurate last sale and quotation 

information with respect to penny 

stocks.53

A. Rescission of Rules Governing the 

OTCBB 

As noted by FINRA, the OTCBB 

currently does not display or widely 

disseminate quotation information on 

any OTC Equity Securities, and all 

quotation activity in OTC Equity 

Securities occurs on member IDQSs.54

As a result, FINRA represents that 

discontinuance of the OTCBB as an 

IDQS will not impact the current level 

of quotation information available for 

OTC Equity Securities.55 The 

Commission received two comment 

letters supporting FINRA’s proposal to 

cease operation of the OTCBB.56 These 

commenters agreed that the OTCBB no 

longer benefits investors or the 

marketplace due to how the market for 

OTC Equity Securities has evolved.57

The Commission believes that the 

continued operation of the OTCBB, 

which FINRA represents is essentially 

defunct, provides no current benefit to 

the market and could cause investor 

confusion with respect to the 

availability of quotations in OTC Equity 

Securities. The Commission recently 

estimated 58 that, on average, there were 

9,998 quoted OTC securities 59 that had 

published quotations per day during the 

calendar year 2019.60 OTC Markets 

Group, which operates OTC Link ATS (a 

member IDQS that would be subject to 

proposed Rule 6439), currently 

identifies 81 broker-dealers that are 

active on the OTC Link ATS in OTC 

securities.61 In addition, from 

aggregated OTC Markets Group data for 

the calendar year 2019, the Commission 

identified 19,141 unique OTC securities 

for 16,059 unique companies.62 Of these 

securities, 11,542 unique OTC securities 

had at least one published quotation on 

OTC Link ATS and 9,895 unique 

companies had a security that was 

quoted at least once on OTC Link ATS 

during the calendar year 2019.63 By 

contrast, the Commission understands 

that there currently is no quoting 

activity occurring on the OTCBB.64

Given the non-existent quoting activity 

on the OTCBB and the emergence of 

member IDQSs, such as OTC Link ATS, 

as the dominant sources for quotation 

activity in OTC Equity Securities, the 

Commission agrees with FINRA that the 

continued operation of the OTCBB 

could result in confusion with respect to 

the availability of quotations in OTC 

Equity Securities. For example, an 

investor looking solely to the OTCBB for 

quotation data for a particular OTC 

Equity Security could mistakenly 

conclude that there are no current 

quotations in the security when, in fact, 

there may be quotations available 

elsewhere—i.e., on member IDQSs. 

Further, FINRA has represented that it 

will not cease operation of the OTCBB 

until proposed Rule 6439 (except for 

Rule 6439(d)(1)(B)) is effective and the 

Commission either grants FINRA’s 

request set forth in the QEQS 

Designation Request Letter or approves 

(if necessary) a subsequent rule filing 

from FINRA that otherwise sets the 

implementation date for deleting the 

rules related to the OTCBB.65

Accordingly, the Commission finds that 

the proposed rule change to rescind 

FINRA’s rules governing the OTCBB 

and cease its operation, while 

simultaneously implementing enhanced 

regulatory requirements for member 

IDQSs pursuant to Rule 6439, will 

protect investors and the public interest, 

consistent with Section 15A(b)(6) of the 

Act, by eliminating investor confusion 

that could arise because members no 

longer submit quotations to the OTCBB 

and, as a result, the OTCBB no longer 

displays any quotations in OTC Equity 

Securities.66

B. Proposed Rule 6439 (Requirements 

for Member Inter-Dealer Quotation 

Systems) 

The Commission finds that the 

proposed requirements set forth in Rule 

6439 relating to member IDQSs that 

permit quotation updates on a real-time 

basis in OTC Equity Securities are 

consistent with the Exchange Act. 

First, the Commission finds that 

proposed Rule 6439(a), which would 

require member IDQSs to establish, 

maintain and enforce written policies 

and procedures relating to the collection 

and dissemination of quotation 

information in OTC Equity Securities on 

or through their systems, is consistent 

with Section 15A(b)(11) of the Act, 

which requires FINRA rules relating to 

quotations for securities sold other than 

on a national securities exchange to be 

designed to produce fair and 

informative quotations, to prevent 

fictitious or misleading quotations, and 

to promote orderly procedures for 

collecting, distributing, and publishing 

quotations. The Commission believes 

that proposed Rule 6439(a) is designed 

to promote orderly procedures for 

collecting, distributing, and publishing 

quotations in OTC Equity Securities 

because the proposed requirements 

would apply to all member IDQSs that 

permit quotation updates on a real-time 


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67See supra note 49 and accompanying text. 

68See OTC Link Letter 1, supra note 11, at 4. The 

Commission notes that while the commenter, in 

making this suggestion, referred to paragraph (c) of 

the proposed rule, it is paragraph (b) under 

proposed Rule 6439— not paragraph (c) that sets 

forth the proposed fair access requirements in Rule 

6439. See supra notes 28–30 and accompanying 

text. 69See FINRA Letter 1, supra note 12, at 5. 70See id., at 5–6. 71 17 CFR 242.301(b)(5). 72See supra note 28. 

73See FINRA Letter 1, supra note 12, at 5–6. 

74See Notice, supra note 3, at 63317. FINRA 

states that order unresponsiveness is an area where 

it regularly receives complaints. FINRA notes that 

in 2018, it received 119 complaints from members 

regarding instances of unresponsiveness to requests 

to execute against a displayed quotation. See id., at 

63318, n.26. 

basis in OTC Equity Securities. In 

addition, proposed Rule 6439(a) would 

require that a member IDQS’s policies 

and procedures relating to collection 

and dissemination of quotation 

information 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 nondiscretionary standards under which 

quotations are prioritized and 

displayed. Moreover, member IDQSs 

would be accountable to FINRA should 

their policies and procedures not meet 

the minimum standards set forth in 

proposed Rule 6439(a) and FINRA has 

represented that it will examine member 

IDQSs for compliance with the 

requirements of proposed Rule 6439, 

including by reviewing the adequacy of 

member IDQSs’ written policies and 

procedures.67 In addition, by requiring 

that all member-IDQSs that provide 

quotations in OTC Equity Securities 

maintain policies and procedures for 

collecting and disseminating quotation 

information, and that such policies and 

procedures be reasonably designed to 

ensure that quotations received and 

disseminated are informative, reliable, 

accurate, firm and treated in a not 

unfairly discriminatory manner, the 

Commission finds that proposed Rule 

6439(a) is designed to promote just and 

equitable principles of trade and protect 

investors and the public interest, 

consistent with Section 15A(b)(6) of the 

Act. 

Second, the Commission finds that 

proposed Rule 6439(b), which would 

require a member IDQS to establish nondiscriminatory 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 IDQS, 

is consistent with Section 15A(b)(6) of 

the Act, which requires that FINRA’s 

rules be designed to promote just and 

equitable principles of trade and protect 

investors and the public interest. The 

Commission believes that the proposed 

requirements relating to fair access are 

designed to afford fair and nondiscriminatory access for all market 

participants to the quotation systems of 

all member IDQSs that provide real-time 

quotations in OTC Equity Securities. 

Given the significant role that member 

IDQSs serve in the marketplace for 

quotations in OTC Equity Securities, the 

Commission believes that these 

requirements should improve access to 

quotations for these securities, which 

should help to ensure that investors 

have the pricing information necessary 

to make informed investment decisions 

with respect to OTC Equity Securities. 

As a result, the Commission finds that 

the requirements of proposed Rule 

6439(b) are designed to promote just 

and equitable principles of trade and 

protect investors and the public interest, 

consistent with Section 15A(b)(6) of the 

Act. 

One commenter suggested that 

member IDQSs that are subject to the 

fair access requirements under 

Regulation ATS should be exempt from 

the fair access requirements of proposed 

Rule 6439(b) because such requirements 

are duplicative.68 In response, FINRA 

stated that, to the extent that a member 

IDQS already is subject to Regulation 

ATS’s fair access standards with respect 

to all OTC Equity Securities traded on 

its platform, then the proposal would 

only additionally require that the 

member IDQS prominently disclose 

such fair access policies and procedures 

to subscribers.69 However, to the extent 

that a member IDQS is not already 

subject to the fair access standards of 

Regulation ATS for all OTC Equity 

Securities traded on its platform, FINRA 

stated that the proposal would fill that 

gap by requiring the member IDQS to 

expand the fair access standards to 

activity in all OTC Equity Securities and 

to prominently disclose such fair access 

policies and procedures.70

As discussed, the Commission 

believes that the requirements relating 

to fair access for member IDQSs, as set 

forth in proposed Rule 6439(b), are 

consistent with the Exchange Act. The 

fair access requirements set forth in 

Rule 301(b)(5) of Regulation ATS,71

which are consistent with the 

requirements set forth in proposed Rule 

6439(b), only apply if an ATS meets 

certain volume thresholds set forth Rule 

301(b)(5).72 On the other hand, the 

requirements set forth in proposed Rule 

6439(b) would apply to quoting and 

trading in all OTC Equity Securities on 

a member IDQS, regardless of the 

percentage of average daily volume that 

such member IDQS has in the security. 

Thus, FINRA’s proposal would ensure 

the application of fair access 

requirements to all member IDQSs that 

permit quotation updates on a real-time 

basis in OTC Equity Securities and to all 

OTC Equity Securities quoted and 

traded on such member IDQSs. 

Furthermore, as noted by FINRA in its 

response to comments,73 proposed Rule 

6439(b) sets forth an additional 

requirement that is not included in Rule 

301(b)(5) of Regulation ATS: That a 

member IDQS’s written standards 

relating to access and any material 

updates, modifications and revisions 

thereto ‘‘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.’’ 

Accordingly, contrary to the 

commenter’s assertion, the Commission 

notes that the proposed fair access 

requirements under Rule 6439(b) are not 

duplicative of the fair access 

requirements set forth in Rule 301(b)(5) 

of Regulation ATS. Further, the 

Commission believes that exempting 

member IDQSs subject to the fair access 

requirements under Regulation ATS 

from proposed Rule 6439(b), as the 

commenter requested, would result in 

such member IDQSs not being subject to 

a key requirement of the proposed rule 

and would result in disparate treatment 

among member IDQSs. 

Third, proposed Rules 6439(c) and (d) 

would require non-auto-executing 

member IDQSs to establish, maintain 

and enforce written policies and 

procedures that are reasonably designed 

to address instances of 

unresponsiveness when orders are 

presented to trade with firm quotations 

displayed in OTC Equity Securities, and 

to report on a monthly basis certain 

aggregate and order-level information to 

FINRA. FINRA states that such 

requirements are designed to enhance 

compliance with the firm quote 

requirements for non-auto-executing 

member IDQSs as set forth in FINRA 

Rule 5220.74 FINRA also states that the 

proposed information to be reported to 

FINRA would support its oversight of 

the OTC securities market by providing 

FINRA with additional information 

regarding the quotation activities 

occurring on non-auto-executing 

member IDQSs and would assist FINRA 

in surveilling for member compliance 


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75See id. 

76See, e.g., Securities Exchange Act Release No. 

60835 (October 16, 2009), 74 FR 54616 (October 22, 

2009) (FINRA–2009–055) (approving proposal to 

adopt FINRA Rule 5220 (Offers at Stated Prices) 

into FINRA’s consolidated rulebook) (‘‘The 

Commission believes that the proposed rule change 

is designed to protect investors and promote the 

maintenance of fair, orderly and efficient markets 

by prohibiting a member from publishing a report 

of any transaction unless the member believes that 

it was a bona fide purchase or sale of the security 

and from ‘‘backing away’’ from its quotations.’’); 

Securities Exchange Act Release No. 12670 (July 29, 

1976), 41 FR 32856 (August 5, 1976) (proposing 

Exchange Act Rule 11Ac1–1 (predecessor to Rule 

602 of Regulation NMS) (‘‘The reliability and 

availability of quotation information are basic 

components of a national market system and are 

needed so that broker-dealers are able to make best 

execution decisions for their customers’ orders, and 

customers are able to make order entry decisions.’’). 

77See supra notes 33–37 and accompanying text 

for a discussion of the requirements proposed under 

Rule 6439(d). 

78See STANY Letter, supra note, 11 at 2; OTC 

Link Letter 1, supra note 11, at 3–4. As proposed, 

non-auto-executing member IDQSs would be 

exempt from the reporting requirements under 

proposed Rule 6439(d)(1)(B) to the extent that such 

items are subject to reporting to the CAT under 

FINRA Rule 6830. See supra note 37 and 

accompanying text. 

79See STANY Letter, supra note 11, at 2; OTC 

Link Letter 1, supra note 11, at 3–4. In connection 

with this suggested modification, one commenter 

stated its view that trade messages on its ATS— 

OTC Link ATS—are negotiations and do not 

constitute ‘‘orders’’ for purposes of Rule 6439 or 

with respect to any CAT reporting obligations. See 

OTC Link Letter 1, supra note 11, at 4. FINRA 

stated in its proposal, and again in its response to 

comments, that such negotiation activities are 

indeed ‘‘orders’’ for purposes of FINRA’s firm quote 

rule obligations and proposed Rule 6439. See 

Notice, supra note 3, at 63317, n.28 (stating that 

such negotiation activities are considered ‘‘orders’’ 

for purposes of firm quote rule obligations and 

proposed Rule 6439). See FINRA Letter 1, supra 

note 12, at 4, n.12. See also Exchange Act Rule 3b– 

16(c) and Rule 300(e) of Regulation ATS (defining 

an ‘‘order’’ as ‘‘any firm indication of a willingness 

to buy or sell a security, as either principal or agent, 

including any bid or offer quotation, market order, 

limit order, or other priced order’’). 

80See FINRA Letter 1, supra note 12, at 4. 

81See STANY Letter, supra note 11, at 3; OTC 

Link Letter 1, supra note 11, at 2–3. One commenter 

noted that, as the only non-auto-executing member 

IDQS, it would be the only IDQS that would be 

subject to the requirements set forth in paragraph 

(c) of the Rule, and requested that FINRA issue 

guidance confirming that its existing ‘‘saturation’’ 

feature and provision of data regarding subscriber 

unresponsiveness to certain order messages under 

its trading functionalities meet the standards set 

forth in paragraphs (c)(3) and (c)(4) of proposed 

Rule 6439. See OTC Link Letter 1, supra note 11. 

at 2–3. 

82See FINRA Letter 1, supra note 12, at 3–4. 

FINRA stated that it agrees that OTC Link ATS’s 

‘‘saturation’’ feature, as FINRA understands it, is 

consistent with the objectives of some of the 

proposed requirements in Rule 6439(c), such as 

proposed Rule 6439(c)(1) and (c)(4), which would 

require that a member IDQS’s policies and 

procedures specify an efficient process for 

monitoring subscriber unresponsiveness and 

determining specified steps when an instance of 

repeated order unresponsiveness may have 

occurred. However, FINRA indicated that it does 

not believe that OTC Link ATS’s current saturation 

feature would meet the objectives of proposed 

paragraphs (c)(2) or (3) of Rule 6439, which, when 

combined, would require that the member IDQS 

provide a mechanism or process whereby one 

subscriber may submit or report to the non-autoexecuting member IDQS a potential instance of 

order unresponsiveness by another subscriber and 

document the subscriber’s rationale in response to 

that event. FINRA further stated that it does not 

expect the member IDQS to investigate or confirm 

a subscriber’s rationale for the unresponsiveness, 

but expects that the member IDQS provide a 

mechanism or process that would permit a 

subscriber to submit or report a potential instance 

of order unresponsiveness and the member IDQS 

would be required to request that the other 

subscriber provide its rationale in connection with 

the instance. For example, the member IDQS could 

provide a messaging protocol or other mechanism 

that would permit a subscriber to submit or report 

to the member IDQS a potential instance of order 

unresponsiveness and that also would contact the 

other party to obtain their rationale. FINRA stated 

that it believes that the member IDQS is in the best 

position to obtain this information from the 

subscriber at the time of, or close in time to, the 

event, and to document this information and make 

it available to FINRA upon request. See id., at 3– 

4. 

with firm quote obligations and 

unresponsiveness.75

The Commission agrees that 

unresponsiveness by those who display 

quotations in the OTC Equity Securities 

market can be harmful to the market and 

investors in OTC Equity Securities. The 

principle that a displayed quotation 

should be ‘‘firm’’ is well established in 

the securities markets.76 In its proposal, 

FINRA would require member IDQSs 

that provide quotations in OTC Equity 

Securities but do not auto-execute 

orders presented for execution against 

such quotations to adopt standards to 

address instances of unresponsiveness 

by their subscribers. Because a system 

that permits manual responses to orders 

received against displayed quotations 

can result in order unresponsiveness, 

the Commission believes that requiring 

such systems to establish, maintain and 

enforce written policies and procedures 

that are reasonably designed to address 

instances of unresponsiveness should 

help to ensure that market participants 

can reasonably rely on the displayed 

quotations on member IDQSs that do 

not auto-execute orders. In addition, the 

requirement for non-auto-executing 

member IDQSs to report aggregate and 

order-level information to FINRA 

should help FINRA surveil for 

unresponsiveness and ‘‘backing away’’ 

by members and to take remedial 

actions against such members, if 

necessary. As such, the Commission 

finds that paragraphs (c) and (d) of 

proposed Rule 6439 are consistent with 

Section 15A(b)(6) of the Act in that they 

are designed, among other things, 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. 

Two commenters suggested that 

FINRA revise proposed Rule 6439(d) to 

exempt member-IDQSs that would have 

reporting obligations under proposed 

paragraph (d) 77 from applicable CAT 

reporting obligations.78 These 

commenters stated that proposed Rule 

6439 would provide a reporting 

mechanism that is more consistent with 

the way in which IDQSs operate and 

therefore would make collection and 

reporting more efficient and effective 

than under the order-based reporting 

prescribed by the CAT.79 In response, 

FINRA stated that the proposal was 

never intended to impact the outcome of 

whether the commenters’ order-level 

information should become CAT 

reportable and that FINRA continues to 

believe that it is appropriate to exempt 

a non-auto-executing member IDQS 

from reporting under proposed Rule 

6439(d)(1)(B) if the IDQS’s order-level 

information is CAT reportable.80

The Commission finds that FINRA’s 

proposal to exempt non-auto-executing 

member IDQSs from reporting orderlevel information pursuant to proposed 

Rule 6439(d)(1)(B) to the extent such 

information becomes reportable to CAT 

is reasonable and is designed to 

effectively reduce reporting 

redundancies. If the information 

required to be reported pursuant to Rule 

6439(d)(1)(B) is already reportable, or 

becomes reportable, to the CAT 

pursuant to FINRA Rule 6830, it will be 

available to FINRA through the CAT, so 

separate reporting pursuant to proposed 

FINRA Rule 6439(d)(1)(B) would be 

duplicative. As a result, the Commission 

finds the proposed exemption is 

consistent with Section 15A(b)(6) of the 

Act in that it is designed to promote just 

and equitable principles of trade. 

These two commenters also requested 

that FINRA provide additional guidance 

with respect to proposed Rule 6439(c)(3) 

and (4), which would require non-autoexecuting member IDQSs to maintain 

policies and procedures that specify an 

efficient process for documenting a 

subscriber’s rationale for 

unresponsiveness and for determining 

specified steps when an instance of 

repeated order unresponsiveness may 

have occurred.81 In response to these 

comments, FINRA provided some 

additional guidance specifically 

requested by commenters relating to the 

requirements of proposed Rule 

6439(c)(3) and (4).82

In response, one commenter raised 

concerns regarding the requirements of 

proposed Rule 6439(c)(2) and (c)(3), 

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83See OTC Link Letter 2, supra note 9. 

84See id., at 2. 

85See id., at 3. 

86See id. 

87See FINRA Letter 2, supra note 12, at 3. 

88See id. As an example, FINRA stated that OTC 

Markets may determine to accept complaints only 

through a specified email address or through a 

complaint protocol that it may establish and, in 

doing so, its obligations under proposed paragraph 

(c)(3) would be limited to complaints received 

through reasonable, specified, established channels. 

See id. 

89See id. 

90See id. 

91See id., at 4. 

92See infra notes 99–101 and accompanying text. 

93See supra note 49 and accompanying text. 

executing member IDQSs to maintain 

policies and procedures that specify an 

efficient process for subscribers 

submitting to the member IDQS 

complaints regarding potential instances 

of order unresponsiveness and 

documenting the subscriber’s rationale 

for unresponsiveness.83 This commenter 

stated that, in attempting to perform this 

function, its member IDQS would not 

have access to the necessary underlying 

information regarding the issue and 

would lack the regulatory authority to 

resolve the dispute.84 This commenter 

further stated that these proposed 

requirements effectively require member 

IDQSs to act as a clearinghouse for 

subscriber complaints of nonresponsiveness and blurs the distinction 

between SROs and commercial market 

operators.85 The commenter accordingly 

requested that FINRA amend the 

proposal to only require that a member 

IDQS escalate instances of 

unresponsiveness to FINRA for review 

when the IDQS is informed of such 

cases via appropriate channels (i.e., 

phone, email, message).86

In response, FINRA stated that it is 

cognizant that IDQSs, including the 

commenter, lack access to certain 

information and lack regulatory 

authority and that it would not expect 

a member IDQS to gather extraneous 

information or resolve disputes (beyond 

steps that may be taken pursuant to 

proposed Rule 6439(c)(4)).87 FINRA 

stated that the proposal would require 

that reasonable policies and procedures 

be developed, which could include 

specifying reasonable and appropriate 

form and methods through which a 

member would accept complaints from 

subscribers pursuant to proposed 

paragraph (c)(2).88 In addition, the 

proposed rule would not require that 

member IDQSs, including the 

commenter, investigate or confirm a 

subscriber’s rationale for 

unresponsiveness or determine whether 

a violation of FINRA Rule 5220 (Offers 

at Stated Prices) has occurred.89 FINRA 

stated that the role of a member IDQS 

under proposed paragraph (c)(3) would 

be limited to information collection, and 

the lack of access to certain information 

regarding instances of potential 

unresponsive would therefore not 

impair a member IDQS’s ability to 

establish policies and procedures 

required under the proposal.90 FINRA 

provided that it continues to believe 

that the requirements of proposed Rule 

6439(c) are reasonable and appropriate 

for non-auto-executing member IDQSs 

given that order unresponsiveness only 

occurs on systems that permit manual 

response to orders received against 

displayed quotations and that it 

believed the member IDQS is in the best 

position to obtain this information from 

the subscriber at the time of, or close in 

time to, the event, and to document this 

information and make it available to 

FINRA upon request.91

The Commission has considered 

commenters’ request for guidance and 

modifications to the proposed 

requirements and FINRA’s responses 

and believes FINRA’s responses support 

the finding that the proposed Rule 

6439(c) is 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, 

consistent with Section 15A(b)(6) of the 

Act. As previously noted, a system that 

permits manual responses to orders 

received against displayed quotations 

can result in order unresponsiveness. 

The Commission agrees with FINRA 

that requiring such systems to establish, 

maintain and enforce written policies 

and procedures that are reasonably 

designed to address instances of 

unresponsiveness, which includes 

requiring such systems to maintain 

policies and procedures that specify an 

efficient process for subscribers 

submitting to the member IDQS 

complaints regarding potential instances 

of order unresponsiveness and 

documenting the subscriber’s rationale 

for unresponsiveness, should help 

ensure that market participants can 

reasonably rely on the displayed 

quotations on member IDQSs that do 

not auto-execute orders and help FINRA 

surveil for unresponsiveness on such 

systems. 

Further, the Commission finds that 

proposed Rule 6439(e), which will 

require member IDQSs to publish and 

keep updated information about orderor quotation-related data products, is 

consistent with both Exchange Act 

Section 15A(b)(6)’s requirement that 

FINRA’s rules be designed to protect 

investors and the public interest and 

Exchange Act Section 15A(b)(11)’s 

requirement that FINRA’s rules contain 

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 

member or person associated with a 

member, and the persons to whom such 

quotations may be supplied. The 

publication of such information will 

provide FINRA with useful information 

to ensure compliance with FINRA rules 

and to monitor the widespread 

availability of OTC Equity Securities’ 

quotation information to investors and 

to market participants through non-SRO 

sources. In addition, market participants 

will benefit from a better understanding 

of such data products when assessing a 

particular member IDQS as a potential 

trading venue. 

Finally, the Commission finds that 

proposed Rule 6439(f), which would 

require a member IDQS to provide 

FINRA with prompt notification when it 

reasonably becomes aware of any 

systems disruption that is not de 

minimis that degrades, limits, or 

otherwise impacts the member IDQS’s 

functionality with respect to trading or 

the dissemination of market data, is 

consistent with Exchange Act Section 

15A(b)(6)’s requirement that FINRA’s 

rules be designed to protect investors 

and the public interest and Section 

15A(b)(11)’s requirement that FINRA’s 

rules relating to quotations be designed 

to promote orderly procedures for 

collecting, distributing, and publishing 

quotations. The Commission believes 

that the uninterrupted operation of 

member IDQSs is vital to investor 

confidence in the OTC securities market 

structure and furthers the goals of 

Section 17B of the Act.92 As such, the 

Commission believes that proposed 

Rule 6439(f) should help FINRA 

monitor and resolve any issues that 

could disrupt investors’ ability to quote 

and execute trades in OTC Equity 

Securities, thereby promoting orderly 

procedures with respect to quotations in 

OTC Equity Securities and protecting 

investors and the public interest. 

FINRA has committed to examining 

member IDQSs for compliance with 

proposed Rule 6439 and has represented 

that it will conduct a targeted exam of 

impacted member IDQSs after the initial 

effectiveness of the rule and will 

incorporate a proposed Rule 6439 

review as part of the regular exam 

program for impacted member firms.93

The Commission believes that these 

exams should assist FINRA in reviewing 


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Federal Register / Vol. 86, No. 109 / Wednesday, June 9, 2021 / Notices 30671 

94See, generally, OTC Link Letter 1, STANY 

Letter and Global OTC Letter, supra note 11. 

95See supra notes 68, 78–79, and 81 and 

accompanying text. 

96See STANY Letter, supra note 11, at 3; OTC 

Link Letter 1, supra note 11, at 4–5. 

97See FINRA Letter 1, supra note 12, at 6. 

98 15 U.S.C. 78q–2. See also supra note 20. 

Section 17B was enacted by Congress as part of the 

Penny Stock Act, which was designed to remedy 

inefficiencies and address regulatory concerns 

caused by the lack of reliable market information 

on penny stocks traded OTC. 

99See 15 U.S.C. 78q–2(b). See also OTCBB 

Designation Letter, supra note 20. 

100See 15 U.S.C. 78q–2(a)(1). 

101See 15 U.S.C. 78q–2(a)(3). 

102See Public Law 101–429, 104 Stat. 931 (1990). 

103See supra notes 60–64 and accompanying text. 

As noted above, the universe of securities 

historically quoted in the OTCBB included penny 

stocks as well as higher priced OTC Equity 

Securities. See supra note 66. 

104See Notice, supra note 3, at 63318. 

105See supra note 20 and 66. As discussed above, 

the Commission previously designated the OTCBB 

as a QEQS for purposes of the Penny Stock Rules. 

In connection with FINRA’s cessation of the 

OTCBB, FINRA has stated that it intends to request 

that the Commission designate the FINRA OTC 

Reporting Facility (see infra note 109 and 

accompanying text), together with any FINRAmember IDQS, as a QEQS for purposes of the Penny 

Stock Rules. See supra note 66. 

106See Notice, supra note 3, at 63319. 

107See id. FINRA represents that there currently 

are no OTCBB symbols. See id., at 63319, n.37. 

108See id. 

109See FINRA Rule 6600 and 7300 Series (OTC 

Reporting Facility). FINRA members generally are 

required to report trades in OTC Equity Securities 

to the ORF within 10 seconds of execution and 

FINRA widely disseminates this transaction 

information in real-time. See FINRA Rule 6622 

(Transaction Reporting). See also Notice, supra note 

3, at 63318, n.36. 

110 15 U.S.C. 78s(b)(2). 

111 17 CFR 200.30–3(a)(12). 

for compliance by member IDQSs with 

the requirements of proposed Rule 6439. 

The Commission notes that, despite 

certain suggested modifications to the 

proposed rule, all three commenters 

supported FINRA’s proposal to enhance 

regulatory requirements for IDQSs.94 In 

addition to commenters’ suggested 

modifications discussed above,95 two 

commenters also suggested that FINRA 

revise Rule 6437 (Prohibition from 

Locking and Crossing), which currently 

prohibits locking and crossing 

quotations displayed in the same IDQS, 

to also prohibit locking and crossing 

displayed quotations between 

connected IDQSs.96 In its response to 

comments, FINRA stated that it has 

been actively considering whether any 

changes to the scope of Rule 6437 are 

appropriate and that it will continue to 

separately assess this issue outside of 

the context of this proposed rule 

change.97 The Commission agrees with 

FINRA that the commenters’ suggestion 

related to FINRA Rule 6437 is beyond 

the scope of the proposed rule change. 

C. Section 17B of the Act 

Finally, the Commission believes that 

the proposed rule change to rescind the 

rules related to the OTCBB and cease its 

operation and adopt proposed Rule 

6439 to expand the obligations of 

member IDQSs that display quotations 

in OTC Equity Securities is consistent 

with Section 17B of the Act.98 FINRA 

has operated the OTCBB pursuant to the 

Commission’s obligations under Section 

17B of the Act to facilitate the 

widespread dissemination of quotation 

information for penny stocks through an 

automated quotation system operated by 

a registered securities association.99

When Congress enacted Section 17B, it 

found that there was a lack of reliable 

and accurate quotation and last sale 

information in the markets for penny 

stocks.100 As such, Section 17B was 

designed to remedy inefficiencies and 

address regulatory concerns caused by 

this lack of reliable market information 

about penny stocks traded OTC, and 

Congress found that a fully 

implemented automated quotation 

system for penny stocks would meet the 

information needs of investors and 

market participants and add visibility 

and regulatory and surveillance data to 

that market.101

Based on how the OTC market has 

evolved since the adoption of Section 

17B,102 the Commission believes that 

the OTCBB no longer furthers the goals 

and objectives of Section 17B of the 

Exchange Act because it no longer is 

utilized as a source of quotation 

information for those OTC Equity 

Securities that meet the definition of 

‘‘penny stock.’’ 103 Rather, member 

IDQSs currently collect and disseminate 

all quotation information in OTC Equity 

Securities, including penny stocks, and 

make such quotation information 

available to investors and market 

participants.104 Therefore, the 

Commission finds that discontinuing 

dissemination of potentially incomplete 

and misleading quotation information 

from the marketplace by ceasing 

operation of the OTCBB, while at the 

same time implementing enhanced 

requirements for member IDQSs on or 

through which quotations in OTC 

Equity Securities, including penny 

stocks, are currently displayed, as set 

forth in proposed Rule 6439, best serves 

and promotes the goals of Section 17B 

of the Act with respect to the 

widespread availability of quotation 

information in penny stocks.105

FINRA has represented that, in 

advance of the discontinuance of the 

OTCBB, FINRA will take steps to ensure 

a smooth transition for issuers and 

members.106 Specifically, although there 

are no members currently using the 

OTCBB, FINRA will publicize 

announcements through its website.107

In addition, FINRA has represented that, 

following the cessation of the OTCBB, 

FINRA will continue to assess the 

widespread availability of quotation 

transparency to investors and market 

participants through non-SRO sources 

on a regular basis, and if the availability 

of quotation information to investors 

declines, FINRA will revisit and, if 

necessary, file a proposed rule change to 

establish an SRO-operated IDQS (or 

other measure) to facilitate the type of 

widespread quotation transparency 

described in Section 17B of the Act.108

Finally, FINRA will continue to 

centralize last sale transaction reporting 

in OTC Equity Securities, including for 

penny stock transactions, through the 

FINRA OTC Reporting Facility (‘‘ORF’’), 

a FINRA-operated system that provides 

last sale information on OTC Equity 

Securities.109 Thus, following cessation 

of the OTCBB, member IDQSs subject to 

proposed Rule 6439 will continue to 

collect and disseminate quotation 

information for OTC Equity Securities, 

including penny stocks, while the ORF 

will continue to collect and disseminate 

real-time last sale price and volume 

information for OTC Equity Securities, 

including penny stocks. 

IV. Conclusion 

It is therefore ordered that, pursuant 

to Section 19(b)(2) of the Act,110 the 

proposed rule change (SR–FINRA– 

2020–031), as modified by Amendment 

No. 2, be, and hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.111

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–12026 Filed 6–8–21; 8:45 am] 

BILLING CODE 8011–01–P 

DEPARTMENT OF STATE 

[Public Notice: 11439] 

Notice of Determinations; Culturally 

Significant Objects Being Imported for 

Exhibition—Determinations: 

‘‘Impressionism to Modernism: Monet 

to Matisse From the Bemberg 

Foundation’’ Exhibition 

SUMMARY: Notice is hereby given of the 

following determinations: I hereby 

determine that certain objects being 

imported from abroad pursuant to an 

agreement with their foreign owner or 

custodian for temporary display in the 


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