MFA Comment Letter on Unintentional Wash Sales

The Managed Funds Association ("the MFA") submitted a comment letter to the SEC regarding FINRA's proposed amendments to Rule 5210 ("Publication of Transactions and Quotations") which seems to expand the scope of prohibited wash sale transactions. In the letter, the MFA stated that the unintentional interaction of orders from one or more algorithms from a single firm ("self-matches") should not be a violation of Rule 5210, and regulators should recognize that, in automated trading environments, a firm's orders from unrelated algorithms may cross. Further, the MFA stated that FINRA's proposed rule should be clarified, and limited to equity market transactions executed and reported in the U.S. Additionally, the MFA stated that regulators should take an "even-handed" approach to preventing the occurrence of self-matches, and FINRA members should take necessary precautions to prevent self-matches that are publicly reported. The MFA also supported further development by marketplaces of software functionality to prevent self-matches by urging the SEC and FINRA to encourage markets and FINRA members to develop greater configurability and accessibility of functionality.

See: MFA Comment Letter; MFA Press Release.See also: FINRA-Proposed Rule on Wash Sale Transactions (with Lofchie Comment) (August 16, 2013); MFA Submits Comments on Proposed Wash Trade Advisory (with Lofchie Comment) (August 14, 2013).