BDA Requests Exemption from SEC Rule 15c2-11

BDA today sent a draft letter to SEC staff requesting exemptive relief with respect to SEC Rule 15c2-11, “Publication or submission of quotations without specified information ” as a prelude to a meeting to discuss the BDA requests. The BDA intends to ask the SEC to exempt fixed income products from the Rule. The Rule currently does not apply to municipal securities.

The BDA letter can be viewed here.

Rule 15c2-11 prohibits dealers from publishing quotations for over-the-counter securities to “quotation mediums” without first reviewing certain issuer financial information and ensuring that information is available publicly. The Rule also has documentation and record retention requirements. Although the Rule has been on the books for decades, most fixed income firms we talked with have not been implementing 15c2-11 compliance with regard to fixed income, largely because the Rule is so obviously targeted at small-cap equities and because SEC and FINRA examiners never demanded that compliance procedures for fixed income incorporate Rule 15c2-11.

However, amendments to the Rule adopted in October shed light on the application of the Rule to fixed-income products other than municipals. SEC staff have informally confirmed with BDA that the Rule applies equally to equities and fixed income. Consequently, we intend to file our exemptive relief request asking the Commission to provide an exemption from the Rule for fixed income as permitted under the Rule and the Securities Exchange Act. Sending the letter in the draft to staff is an interim step.
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