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Amendments Would Enhance FINRA Oversight of Firms That Trade Securities Proprietarily Across Markets

The Securities and Exchange Commission today re-proposed rule amendments that would narrow the exemption from Section 15(b)(8) of the Securities Exchange Act, which requires any broker or dealer registered with the Commission to become a member of a national securities association unless the broker or dealer effects transactions in securities solely on an exchange of which it is a member. FINRA currently is the only registered national securities association.

“I was pleased to support these amendments because, if adopted, they would modernize and improve market oversight for regulators,” said SEC Chair Gary Gensler. “By extending FINRA oversight to potentially dozens of broker-dealers, the proposed amendments would strengthen oversight of firms trading securities across several markets, helping to protect investors and maintain fair, orderly, and efficient markets.”

Exchange Act Rule 15b9-1 provides an exemption from Section 15(b)(8) under which certain Commission-registered dealers may engage in unlimited proprietary trading of securities on any national securities exchange of which they are not a member or in the over-the-counter market without triggering Section 15(b)(8)’s FINRA membership requirement.

The proposed amendments would replace this proprietary trading exemption with narrow exemptions from Section 15(b)(8)’s FINRA membership requirement. Under the proposed amendments, a broker-dealer that carries no customer accounts and effects securities transactions other than on a national securities exchange where it is a member would be exempt from Section 15(b)(8) only if those transactions result from routing for order protection purposes by a national securities exchange where the broker-dealer is a member or constitute the execution of the stock leg of a stock-option order.

The proposal will be published on and in the Federal Register. The public comment period will remain open for 60 days following publication of the proposing release on the SEC’s website or 30 days following publication of the proposing release in the Federal Register, whichever period is longer.

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