MFA, SIFMA and ICI Submit Order-Routing Disclosure Template Recommendation to SEC (with Lofchie Comment)

MFA, SIFMA and the Investment Company Institute (collectively, the "Associations") submitted a letter to SEC Chair Mary Jo White in advance of the SEC staff's recommendations for a rule proposal requiring the disclosure of customer-specific order-routing information upon institutional investors' request.

Additionally, the Associations attached an order-routing disclosure template to the letter. The recommended disclosure template provides for the minimum disclosure of order-routing and execution-quality information that institutional investors could request from their broker-dealers. The disclosure required also includes "a broad range of statistical data" regarding a broker's handling of a specific customer's orders, along with the execution quality achieved by the broker at each execution venue.

The Associations stated their belief that the information in the template will help to inform SEC staff members as they prepare recommendations, as well as enhance disclosures and provide the institutional investor clients of broker-dealers, including funds and their managers, with standardized information about their broker-dealers' order-routing practices and execution quality.

Lofchie Comment: If the Exchanges are required to produce clear disclosure regarding their various order types, and the broker-dealers are required to produce clear disclosure regarding their order-routing mechanisms, does it then become possible to eliminate Regulation NMS? That is, is it possible to move from a trading regime that is based primarily on rules imposed on broker-dealers to a trading regime that is based on disclosures provided to investors, who can then decide to which exchanges or broker-dealers their business should be sent?

See: MFA, SIFMA and ICI Cover Letter to SEC; Order-Routing Disclosure Template. See also: SIFMA's Cross Product Standard Forms and Documentation Library.