Type to search

Regulation Sell-side Archive Articles Americas

SEC Delays Rule 606, Again

Broker-dealers have until the new year to comply with mandates to step up routing disclosures.

The U.S. Securities and Exchange Commission is giving a bit more time for broker-dealers to comply with new rules that mandate more transparency in trade routing. 

The Commission “is granting a temporary exemption from reporting obligations under Rules 606(a) and 606(b)(3) to provide additional time for broker-dealers to complete the development of systems and processes necessary to begin collecting the data required by the rule,” the SEC said in a Sept. 4 order. 

The SEC voted in November 2018 to amend Rule 606, which requires broker-dealers to disclose to investors new and enhanced information about the way they handle investors’ orders. Rule 606(a) pertains to ‘held’ order flow, for which a trader is held to the duty of best execution, while 606(b) covers ‘not held’ order flow, for which broker-dealers have price and time discretion.  

Broker-dealers now have until January 1, 2020 to comply with Rule 606(a); broker-dealers who self-route have until the same date to comply with Rule 606(b)(3), while broker-dealers who self-route have until April 1, 2020 to comply with Rule 606(b)(3). The effective date had been Sept. 30, 2019, which itself was pushed back from May 20. 

The SEC, through its Division of Trading and Markets, noted that the Financial Information Forum and Security Traders Association had requested the delay, on the premise that the industry wouldn’t be ready for Sept. 30. 

There are challenges “with the Rule 606(b)(3) requirement that (a broker-dealer) provide customer-specific reports of data regarding its handling of customers’ not held NMS stock orders,” the SEC noted, citing the FIF and STA. 

In addition, “these challenges are greater when a broker-dealer must report the information required under Rule 606(b)(3) for orders handled using the order routing systems of another broker-dealer than they are for orders handled using a broker-dealer’s own systems.”


You Might also Like