FINRA Regulatory Notice 18-25 FINRA Reminds Alternative Trading Systems of Their Obligations to Supervise Activity on Their Platforms
FINRA is issuing this Notice to remind Alternative Trading Systems (ATSs) of their supervision obligations. As registered broker-dealers and FINRA members, ATSs—like other broker-dealer trading platforms—are required to maintain supervisory systems that are reasonably designed to achieve compliance with applicable securities laws and regulations, and with applicable FINRA rules, including, for example, rules on disruptive or manipulative quoting and trading activity.
SR-NASDAQ-2018-067 Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Delete and Replace the Current Rules on Arbitration
The Exchange proposes to delete the current rules on arbitration (“Current Arbitration Rules”), currently under the 10000 Series (Rules 10001 through 10102), and adopt the Nasdaq ISE, LLC (“ISE”) rules on arbitration in Chapter 18 of the ISE’s rulebook (“Proposed Arbitration Rules”) into General 6 in the Exchange’s rulebook’s (“Rulebook”) shell structure.
FINRA has released an updated Security Futures Risk Disclosure Statement to replace the one that was originally issued in 2002, and a new integrated supplement. The updated Security Futures Risk Disclosure Statement (Updated Statement) incorporates into the main body of the document the cumulative changes made to date. Among other changes, the Updated Statement reflects that the standard settlement cycle for most broker-dealer transactions is now two business days after the trade date (T+2) and the current cash limit protection of the Securities Investor Protection Corporation (SIPC). The new supplement (2018 Supplement) integrates, in a single supplement, all the disclosure updates made through prior supplements released in 2010 and 2014, and the updated disclosures described herein. The implementation date of the Updated Statement and 2018 Supplement is September 5, 2018.
FINRA Special Notice 7/30/18 FINRA Requests Comment on Financial Technology Innovation in the Broker-Dealer Industry
New financial technology innovations, commonly known as “fintech,” can offer benefits for investors and the financial services industry, but can also present investor protection concerns where the safeguards of the securities laws are not respected. FINRA’s discussions with representatives of the fintech industry and our member firms through our Innovation Outreach Initiative have enabled us to better understand market participants’ interest in efforts among regulators to create an environment supportive of fintech innovations that benefit investors and the capital markets. Moreover, we have received several requests to solicit feedback from the broader public regarding how FINRA may support fintech innovation consistent with our mission of investor protection and market integrity. In response to these requests, we are seeking comments on how FINRA can support fintech development consistent with this mission. In addition, we request specific comment on certain fintech areas, including the provision of data aggregation services, supervisory processes concerning the use of artificial intelligence, and the development of a taxonomy-based machine-readable rulebook.
FINRA Regulatory Notice 18-22 FINRA Requests Comment on Proposed Amendments to Its Discovery Guide to Require Production of Insurance Information in Arbitration
FINRA is requesting comment on proposed amendments to the Discovery Guide’s (Guide) Firm/Associated Persons Document Production List (Firm/Associated Persons List) to require firms and associated persons, upon request, to produce documents concerning third-party insurance coverage in a customer arbitration proceeding. The proposed amendments would strictly limit the circumstances under which insurance coverage information could be presented to the arbitrators.
FINRA Regulatory Notice 18-23 FINRA Requests Comment on a Proposal Regarding the Rules Governing the New and Continuing Membership Application Process
FINRA seeks comment on proposed amendments to the NASD Rule 1010 Series (Membership Proceedings) (collectively, the Membership Application Program (MAP) rules). The proposal is the result of FINRA’s retrospective review of the MAP rules and processes, and is intended to reduce unnecessary burdens on new and existing firms, while strengthening investor protections. The proposed amendments would replace the NASD Rule 1010 Series with the proposed FINRA Rule 1100 Series (New and Continuing Membership). The proposed amendments would also include additional provisions to address regulatory issues FINRA staff identified and codify existing membership related interpretations and practices.
FINRA Regulatory Notice 18-21 SEC Approves Amendments to Arbitration Codes to Provide an Additional Hearing Option in Simplified Arbitration
FINRA has amended its rules to provide a new option for simplified arbitration. The amendments provide an additional hearing option for parties in arbitration with claims of $50,000 or less, excluding interest and expenses. The amendments are effective September 17, 2018.
The MSRB is requesting comment on draft amendments to MSRB Rule G-11, on primary offering practices, and MSRB Rule G-32, on disclosures in connection with primary offerings. This request for comment (“Request for Comment”) is intended to elicit views and input from all interested parties regarding the proposed changes, including on the benefits and burdens and possible alternatives, of the proposed changes. The comments will assist the MSRB in determining whether to propose these changes for adoption. On September 14, 2017, the MSRB published a concept proposal (“Concept Proposal”) requesting comment on possible amendments to the current primary offering practices of brokers, dealers and municipal securities dealers (together, “dealers”). The MSRB received 12 comment letters providing views and insight of market participants. The comments received, in addition to continuing dialogue with industry stakeholders, formed the foundation for this Request for Comment. Comments should be submitted no later than September 17, 2018, and maybe submitted in electronic or paper form.
Pursuant to Regulation Systems Compliance and Integrity (“Reg SCI”) Rule 1004 and Cboe Exchange, Inc. (the “Exchange” or “Cboe Options”) Rule 6.18, the Exchange is required to establish standards for the designation of those Trading Permit Holders (“TPHs”)that the Exchange reasonably determines are, taken as a whole, the minimum necessary for the maintenance of fair and orderly markets in the event of the activation of the Exchange’s business continuity and disaster recovery plans and designate participants pursuant to those standards. Designated TPHs, referred to as “Designated BCP/DR Participants,” are required to participate in testing of the Exchange’s business continuity and disaster recovery plans. The Exchange announces mandatory testing dates periodically. The next mandatory test is October 13, 2018.
The Securities and Exchange Commission is adopting amendments to the regulatory requirements in Regulation ATS under the Securities Exchange Act of 1934 (“Exchange Act”) applicable to alternative trading systems (“ATSs”) that trade National Market System (“NMS”) stocks (hereinafter referred to as “NMS Stock ATSs”), including so called “dark pools.” First, we are adopting new Form ATS-N, which will require NMS Stock ATSs to disclose information about their manner of operations, the broker-dealer that operates the ATS (“broker-dealer operator”), and the ATS-related activities of the broker-dealer operator and its affiliates. Second, as amended, Regulation ATS will require public posting of certain Form ATS-N filings on the Commission’s website, which will be accomplished through the Commission’s Electronic Data Gathering, Analysis, and Retrieval system (“EDGAR”) and require each NMS Stock ATS that has a website to post on its website a direct URL hyperlink to the Commission’s website. Third, the amendments to Regulation ATS that we are adopting today provide a process for the Commission to review Form ATS-N filings and, after notice and opportunity for hearing, declare an NMS Stock ATS’s Form ATS-N ineffective. Fourth, Regulation ATS, as amended, will require all ATSs subject to Regulation ATS to place in writing its safeguards and procedures to protect subscribers’ confidential trading information. We are also adopting conforming amendments to Regulation ATS and Exchange Act Rule 3a1-1(a).
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