Proposed Trade Reporting Requirements for OTC Options Transactions
Summary
SIFMA and SIFMA AMG provided comments to the Financial Industry Regulatory Authority, Inc. (FINRA) on its Regulatory Notice 22-14. In the notice, FINRA proposes to establish for the first time a requirement for firms to report transactions in an OTC option that is a put or call on one or more listed underlying securities (including an option on an individual underlying security or an option on a basket of securities that meets the definition of a “conventional index option”), including transactions executed by the firm on either a principal or agency basis.
Excerpt
September 20, 2022
VIA ELECTRONIC SUBMISSION
Ms. Jennifer Piorko Mitchell
Office of the Corporate Secretary
Financial Industry Regulatory Authority, Inc.
1735 K Street, NW
Washington, DC 20006-1506
Re: Proposed Trade Reporting Requirements for Over-The-Counter Options Transactions (FINRA Regulatory Notice 22-14)
Dear Ms. Mitchell:
The Securities Industry and Financial Markets Association (“SIFMA”)1 appreciates the opportunity to respond to the request for comment by the Financial Industry Regulatory Authority, Inc. (“FINRA”) on its Regulatory Notice 22-14 (“RN 22-19”). In the notice, FINRA proposes to establish for the first time a requirement for firms to report transactions in an OTC option that is a put or call on one or more listed underlying securities (including an option on an individual underlying security or an option on a basket of securities that meets the definition of a “conventional index option”), including transactions executed by the firm on either a principal or agency basis.2 The proposal further provides that it “is limited to options with terms that are identical or substantially similar to listed options, including FLEX options.”
1 SIFMA is the leading trade association for broker-dealers, investment banks and asset managers operating in the U.S. and global capital markets. On behalf of our industry’s one million employees, we advocate on legislation, regulation and business policy affecting retail and institutional investors, equity and fixed income markets and related products and services. We serve as an industry coordinating body to promote fair and orderly markets, informed regulatory compliance, and efficient market operations and resiliency. We also provide a forum for industry policy and professional development. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA). For more information, visit http://www.sifma.org.
2 As FINRA notes in RN 22-14, “OTC options” are options that meet the definition of “conventional option” under FINRA Rule 2360(a)(9). The term “conventional option” means: (A) any option contract not issued, or subject to issuance, by The Options Clearing Corporation (OCC); or (B) an OCC Cleared OTC Option. The term “OCC Cleared OTC Option” means any put, call, straddle or other option or privilege that meets the definition of an “option” under Rule 2360(a)(21), and is cleared by the OCC, is entered into other than on or through the facilities of a national securities exchange and is entered into exclusively by persons who are “eligible contract participants” as defined in the Exchange Act. Firms view acting on an agency basis in the context of this proposal to be limited to “[t]rades required to be intermediated by a U.S. broker-dealer under SEA Rule 15a-6(a)(3) or 15a-6(a)(4),” as noted
in RN 16-17 and used in LOPR reporting.