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REGULATORY UPDATES
8/01/01 - Public Posting Of Market Centers' Order Execution Quality Reports
In accordance with the Securities and Exchange Commission's Rule 11Ac1-5 requiring market centers to publicly disclose order execution statistics on certain securities, the first reports on select exchange-listed securities for June 2001 were made public by market centers by the end of July. In these reports, market centers were required to disclose order execution data on those securities that comprise the 1,000 New York Stock Exchange securities and 200 American Stock Exchange securities with the highest average daily share volumes for the quarter ending December 31, 2000. As of July, market centers must also begin collecting order execution data on the next 1,000 NYSE and 200 Amex securities with the highest average daily share volumes for the quarter ending March 31, 2001. The July 2001 report must be made publicly available by the end of August.
Market centers received an exemption from reporting on Nasdaq-listed securities until the end of July (see the Exemption Letter). As of August 1, 2001, market centers must begin collecting data on the 1,000 Nasdaq securities with the highest average daily share volume for the quarter ending December 31, 2000 and on the next 1,000 Nasdaq securities with the highest average daily share volume for the quarter ending March 31, 2001. The first order execution quality reports for Nasdaq securities, covering the month of August, will be made available in September 2001. (The top 2,000 Nasdaq stocks are posted on www.nasdaqtrader.com.)
Starting October 1, market centers must begin collecting order execution data on the remaining national market system securities. The first report for these securities will be posted in November. Please note that there are certain orders that market centers do not need to report on. Please see Related Links for documents detailing these exemptions.
A list of web sites with downloadable files or hyperlinks to the exchanges is available at: http://www.sec.gov/investor/pubs/exquality.htm.
6/22/01 - SEC Issues Interpretive Guidance On Rules 11Ac1-5 and 11Ac1-6
The Securities and Exchange Commission today issued interpretive guidance on Rule 11Ac1-5, the new order execution reporting requirements for market centers, and Rule 11Ac1-6, the new order routing reporting requirements for broker-dealers. In addition to providing interpretive guidance on Rule 11Ac1-5, Staff Legal Bulletin No.12R also announces several exemptions from the rule's reporting requirements, including one for smaller firms and another for certain SelectNet orders. Market centers, however, must still begin to collect the data on these orders. Market centers must begin reporting on orders in Nasdaq securities as of July 31, 2001, with the first report due at the end of September. The bulletin and related information is available at: http://www.sec.gov/interps/legal/slbim12a.htm
Staff Legal Bulletin 13 provides interpretive guidance for broker-dealers on compliance with Rule 11Ac1-6. The SEC also announced an exemption from the reporting requirements for those broker-dealers who route a de minimus amount of orders to a certain venue. The initial compliance date remains July 2 for this rule. The bulletin and related information is available on the SEC web site: http://www.sec.gov/interps/legal/mrslb13.htm
9/13/00 - Disclosure of Order Routing and Execution Practices
On February 23, 2000, the Commission issued a release that discussed market fragmentation issues. The Market Structure Committee submitted a comment letter on May 5, 2000 responding to that release. The letter called for better linkages and adoption of a market-wide trade through rule (i.e., price priority across markets) to address the potential for increased fragmentation in the markets. On July 25, 2000, the Commission issues a release that largely accepted the views of the Market Structure Committee. The SEC did not propose rules that would attempt to dictate the specific architecture of the market. In the release, the SEC appears to take a much more moderate approach, proposing greater disclosure of order routing and order execution practiced by brokers and market centers. Specifically, the Commission proposed: (i) requiring market centers that trade national market system securities to make available to the public monthly electronic reports (ii) requiring broker-dealers that route orders in equity and option securities on behalf of customers to make publicly available quarterly reposts that describe their order routing practices and disclose the venues to which the customer order are routed for execution. In addition, the proposal would require broker-dealers to disclose to customers, on request, where their individual orders were routed for execution. The Market Structure Committee is considering there proposals.
