SIFMA Says FINRA Proposal on OTC Options Reporting Lacks Clarity

SIFMA raised "significant" concerns with FINRA's proposal to require daily trade reporting for certain OTC options transactions, saying that it lacked regulatory clarity as to its scope and would leave broker-dealers ill-equipped to timely implement any changes necessary for compliance. (See prior coverage.)

SIFMA argued that requiring public dissemination of OTC options activity raises a number of concerns, such as front running and "copycatting strategies" that could hinder investment performance and raise costs to investors, and that these concerns "significantly outweigh" the benefits of public disclosure.

In addition, SIFMA suggested that most firms that transact in relevant OTC options will be above the 200-contract threshold and trigger an large options position reporting obligation already. SIFMA also criticized the scoping standard of the proposal, saying that "substantially similar" and the proposal's test for implementation of that standard and suggested that FINRA instead rely on existing Rule 2360 to clarify the scope.

Finally, SIFMA urged FINRA to provide at least 18 months to implement any final proposal.