Document ID: SEC-2020-0470-0001
Agency: sec
Document Type: Notice
Title: Order Granting Application Under the Exchange Act
Posted Date: 2020-03-31T04:00Z

[Federal Register Volume 85, Number 62 (Tuesday, March 31, 2020)]
[Notices]
[Pages 17927-17929]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-06621]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88478]

Order Granting Application by The Financial Information Forum and 
Security Traders Association for a Temporary Exemption Pursuant to Rule 
606(c) of Regulation NMS Under the Exchange Act in Response to the 
Effects of COVID-19

March 25, 2020.

I. Introduction

    The Financial Information Forum (``FIF'') and Security Traders 
Association (``STA'') have filed with the Securities and Exchange 
Commission (``Commission'') an application for an exemption from 
certain requirements \1\ of Rule 606 of Regulation NMS under the 
Exchange Act in light of unforeseen and uncertain demands on 
information technology and other resources required to respond to 
COVID-19.\2\
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    \1\ See letter from James Toes, President & CEO, STA, Chris 
Halverson, Chairman of the Board, STA, and Christopher Bok, 
Director, FIF, to Brett Redfearn, Director, Division of Trading and 
Markets (``Division''), Commission, dated March 24, 2020 (``FIF/STA 
Letter'').
    \2\ 17 CFR 242.606.
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    This order grants the following temporary exemptive relief from 
certain requirements of Rule 606, which is set forth in greater detail 
below: (1) Broker-dealers are exempt from the requirement to provide 
the public report covering the first quarter of 2020 required by Rule 
606(a) until May 29, 2020; (2) broker-dealers that engage in outsourced 
routing activity are exempt from the requirement to collect the monthly 
customer-specific data required by Rule 606(b)(3) for such activity 
until June 1, 2020, and are exempt until July 29, 2020, from the 
requirement to provide a customer-specific report of June 2020 
outsourced routing data within seven business days for customer 
requests for such customer-specific reports that are made on or before 
July 17, 2020.\3\
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    \3\ Customer-specific reports of June 2020 outsourced routing 
data are due within seven business days of customer requests made 
after July 17, 2020.
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II. Background

    On November 2, 2018, the Commission adopted amendments to Rule 606 
of Regulation NMS under the Exchange Act.\4\ Under Rule 606(a), broker-
dealers must provide quarterly, aggregated public disclosure of their 
routing and handling of orders submitted on a held basis in NMS stock. 
In addition, under Rule 606(b) a broker-dealer must, upon request of 
its customer, provide customer-specific disclosures related to the 
routing and execution of the customer's NMS stock orders submitted on a 
not held basis for the prior six months, subject to two de minimis 
exceptions.
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    \4\ See Exchange Act Release No. 84528 (November 2, 2018), 83 FR 
58338 (November 19, 2018) (``Adopting Release'').
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    The Commission previously revised the compliance dates for Rule 606 
to provide broker-dealers with additional time to implement the systems 
and other changes necessary to comply with Rule 606. On April 30, 2019, 
the Commission extended the compliance date for the amendments to Rule 
606 to begin following September 30, 2019.\5\

[[Page 17928]]

On September 4, 2019, the Commission, by the Division pursuant to 
delegated authority, granted temporary exemptions from amended Rule 
606: (1) To all broker-dealers, from the requirement to collect the 
quarterly public data on held orders until January 1, 2020 (with the 
first quarterly report due by the end of April 2020); (2) to all 
broker-dealers that engage in self-routing activity, from the 
requirement to collect the customer-specific monthly data for not held 
orders until January 1, 2020 (with the first customer-specific report 
of such data due seven business days after February 15, 2020, for 
customer requests made on or before February 15, 2020); and (3) to all 
broker-dealers that engage in outsourced routing activity, from the 
requirement to collect the customer-specific monthly data for not held 
orders until April 1, 2020 (with the first customer-specific report of 
such data due seven business days after May 15, 2020, for customer 
requests made on or before May 15, 2020).\6\
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    \5\ See Exchange Act Release No. 85714 (April 24, 2019), 84 FR 
18136 (April 30, 2019) (``April 2019 Extension''). The original 
compliance date set forth in the Adopting Release was May 20, 2019. 
The April 2019 Extension did not extend the original compliance date 
for the amendment to Rule 605.
    \6\ See Exchange Act Release No. 86874 (September 4, 2019), 84 
FR 47625 (September 10, 2019) (``September 2019 Extension''). As set 
forth in the September 2019 Extension, ``self-routing activity'' 
refers to when a broker-dealer handles customers' orders using its 
own systems and ``outsourced routing activity'' refers to when a 
broker-dealer uses the order routing systems of another broker-
dealer.
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    FIF and STA request that the Commission: (1) Delay to May 29, 2020, 
the date by which broker-dealers must provide the public report of 
first quarter 2020 data required by Rule 606(a); and (2) extend to June 
1, 2020, the date that broker-dealers that outsource routing must begin 
to collect the monthly customer-specific data for not held NMS stock 
orders required by Rule 606(b)(3), and extend to July 29, 2020, the 
date by which broker-dealers must provide the customer-specific report 
of June 2020 data for customer requests that are made on or before July 
17, 2020.\7\ According to FIF and STA, due to the challenges posed by 
COVID-19, resources at firms are currently focused on the safety of 
employees and supporting investors, and extensions of the near-time 
compliance dates for implementation of amended Rule 606 would allow 
broker-dealers to allocate resources towards addressing those 
challenges as well as issues associated with current market volatility 
and mitigate potential risks to firms' regulatory systems that 
otherwise would need to be modified and tested to satisfy near-term 
implementation milestones.\8\
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    \7\ See FIF/STA Letter, supra note 2. FIF and STA did not 
request an extension of monthly customer-specific reporting for not 
held orders for self-routing broker-dealers. See id. The reporting 
requirement for self-routing activity has already come due and is 
ongoing.
    \8\ Id.
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III. Order Granting Temporary Exemptions

    Rule 606(c) \9\ authorizes the Commission to conditionally or 
unconditionally exempt any person, security, or transaction, or any 
class or classes of persons, securities, or transactions, from any 
provision or provisions of this section, if the Commission determines 
that such exemption is necessary or appropriate in the public interest, 
and is consistent with the protection of investors. The Commission, by 
the Division pursuant to delegated authority,\10\ is granting a 
temporary exemption from certain of the existing compliance dates that 
were set forth in the September 2020 Extension. The Commission believes 
that this temporary relief is necessary or appropriate in the public 
interest, and consistent with the protection of investors, given the 
unforeseen and uncertain challenges, including business continuity 
implementation and market volatility, posed by COVID-19 to broker-
dealers that must comply with the Rule 606 requirements to provide 
reports of order handling and routing data.
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    \9\ 17 CFR 242.606(c).
    \10\ 17 CFR 200.30-3(a)(69).
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A. Rule 606(a)

    The Commission has determined that it is necessary or appropriate 
in the public interest, and consistent with the protection of 
investors, to provide broker-dealers with a temporary exemption until 
May 29, 2020, from the requirement to provide the initial public report 
of first quarter 2020 data for held orders under Rule 606(a). Broker-
dealers have been required to collect the held order data since January 
1, 2020, but they are not required to generate the initial public 
report of that data until the end of April 2020. Pursuant to this 
exemption, a broker-dealer has an additional month to prepare the 
public report of first quarter 2020 held order data.\11\
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    \11\ The Commission is granting the exemption as requested by 
FIF and STA. See FIF/STA Letter, supra note 2. Broker-dealers are 
still required to collect the held order data required by Rule 
606(a) for the full second quarter of 2020, and to provide the 
public report of that data by the end of July 2020.
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B. Rule 606(b)(3) for Broker-Dealers Engaged in Outsourced Routing 
Activity

    For substantially the same COVID-19-related reasons, the Commission 
has determined that it is necessary or appropriate in the public 
interest, and consistent with the protection of investors, to provide 
broker-dealers that outsource routing with a temporary exemption until 
June 1, 2020, from the requirement to collect the monthly customer-
specific data for their outsourced routing activity, and until July 29, 
2020, from the requirement to provide the first customer-specific 
report of such data for customer requests that are made on or before 
July 17.\12\ This first report would cover June 2020. Pursuant to this 
exemption, a broker-dealer has two additional months to prepare to 
collect the data required by Rule 606(b)(3) for outsourced routing 
activity and to prepare the first report relating to outsourced routing 
activity.\13\
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    \12\ The Commission is granting the exemption as requested by 
FIF/STA. See FIF/STA Letter, supra note 2.
    \13\ Rule 606(b)(3) requires a broker-dealer to provide a report 
to its customer within seven business days of receiving the customer 
request. Similar to the relief provided to broker-dealers in the 
September 2019 Extension, the Commission believes it is appropriate 
to provide broker-dealers additional time to prepare the first 
report of June data in response to customer requests received in 
early July. Accordingly, the report for any request received on or 
before July 17 would not be due until July 29. For example, if a 
customer requests a report of June 2020 data on July 1, 2020, the 
broker-dealer is not required to provide the report within seven 
business days of July 1, 2020; instead, the broker-dealer is 
required to provide the report no later than July 29, 2020. The 
report for any request received after July 17 would be due seven 
business days after such request.
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    The chart below depicts the current timing for reporting 
requirements under amended Rule 606 as set forth in the September 2019 
Extension, as well as the temporary exemptions being granted herein:

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                 Who?                           What?             Current requirement           Exemption
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Quarterly Public Reporting:
    All routing broker-dealers.......  Aggregate public report  Data collection began    Report covering Q1 2020
                                        on routing held orders   Jan. 1, 2020; report     due May 29, 2020.
                                        in NMS stocks and        covering Q1 2020 due
                                        orders for options       Apr. 30, 2020.
                                        contracts of less than
                                        $50,000 *.

[[Page 17929]]

 
Monthly Customer-Specific Reporting
 (upon request):
    Self-routing broker-dealers......  Detailed customer-       Data collection began    None.
                                        specific order           Jan. 1, 2020; first
                                        handling disclosures     report (covering
                                        for NMS stock orders     January) was due Feb.
                                        submitted on a not       25, 2020.
                                        held basis.
    Broker-dealers that outsource      .......................  Data collection begins   Data collection begins
     routing (white-labeling).                                   Apr. 1, 2020; first      June 1, 2020; first
                                                                 report (covering         report (covering June)
                                                                 April) due May 27,       due July 29, 2020 for
                                                                 2020.                    customer requests made
                                                                                          on or before July 17.
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* This requires disclosure of material aspects of broker-dealer's relationship with routing venues, which
  includes the details of any arrangement with a venue where the level of execution quality is negotiated for an
  increase or decrease in payment for order flow. See Adopting Release at 58376, n. 397.

    Accordingly, it is ordered, pursuant to Rule 606(c) of Regulation 
NMS under the Exchange Act,\14\ that:
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    \14\ 17 CFR 242.606(c).
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    (1) Broker-dealers are exempt from the requirement to provide the 
public report of held order data for the first quarter of 2020 required 
by Rule 606(a) until May 29, 2020.
    (2) Broker-dealers engaged in outsourced routing activity are 
exempt from the requirement to start collecting the Rule 606(b)(3) data 
until June 1, 2020 for such activity. For customer requests that are 
made on or before July 17, 2020, a broker-dealer is exempt from the 
requirement to provide a Rule 606(b)(3) report for outsourced routing 
activity covering June 2020 data until July 29, 2020.
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    \15\ 17 CFR 200.30-3(a)(69).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-06621 Filed 3-30-20; 8:45 am]
BILLING CODE 8011-01-P