FINRA Adopts Trading Activity Fee Exemption

FINRA amended its By-Laws to exempt certain transactions from the Trading Activity Fee ("TAF"). The exemptions apply to transactions that are conducted by a proprietary trading firm and effected on an exchange of which the firm is a member. The amendments go into effect on November 6, 2023.

According to the FINRA Notice, to qualify for the TAF exemption a proprietary trading firm must: (i) trade exclusively its own capital, (ii) not have customers with which it engages in securities activities and (iii) conduct all trading through the firm's accounts by traders that are owners of, employees of, or contractors to the firm, or employees of an affiliate of the firm. FINRA stated that the exemption is intended to reduce the financial burden of the TAF on proprietary trading firms that conduct their trading activities on exchanges where they hold membership.

The changes to the By-Laws follow on recent SEC amendments to Exchange Act Rule 15b9-1 ("Exemption for certain exchange members") which would require many proprietary trading firms to become members of FINRA (see previous coverage).