FINRA Requests Comment on Equity Market Disclosure Proposals (FINRA Reg. Notice 14-51)

FINRA issued a Regulatory Notice requesting comments on two proposals intended to increase transparency in the equity markets. The first proposal would amend the Order Audit Trail System ("OATS") rules to require member firms to identify nonmember broker-dealers when reporting orders received from such entities. FINRA says that such disclosures would, among other things, allow it to (i) "more readily detect potentially violative trading activity" by such nonmembers and (ii) more effectively determine whether members are complying with regulatory obligations, including Exchange Act Rule 15c3-5.

The second proposal would require alternative trading systems ("ATSs") to provide FINRA with additional order book information using existing OATS interfaces (including "all events and order attributes that would change the ATS's system quantity . . . [or] the displayed quantity"). The requirements would apply to any ATS (whether "lit" or a "dark pool") that accounts for more than 0.25% of the consolidated market share in a security over a one-month period, and would apply to such ATSs with respect to all securities for which the ATS receives an order.

The proposals comprise two of the seven initiatives approved by the FINRA board in September that relate to equity market structure and automated trading activities, including so-called "high-frequency" trading.

Comments to FINRA on the proposals are due by January 13, 2015.

See: FINRA Regulatory Notice 14-51. Related news: FINRA Board Approves Series of Equity Trading and Fixed Income Rulemaking Items (with Lofchie Comment) (September 19, 2014).