Request for Exemptive Order Pursuant to Rule 15c2-11(g)

Summary

SIFMA and the Bond Dealers of America (“BDA”) provided comments to the U.S. Securities and Exchange Commission (“Commission”) and its staff on this important development in the over the-counter (“OTC”) securities markets.

Excerpt

August 26, 2021

Ms. Vanessa Countryman

Secretary

Office of the Secretary

U.S. Securities and Exchange Commission

100 F Street, NE

Washington, DC 20549-1090

Re: Request for Exemptive Order Pursuant to Rule 15c2-11(g)

The Securities Industry and Financial Markets Association (“SIFMA”) and the Bond Dealers of America (“BDA”) and their members appreciate this opportunity to engage with the U.S. Securities and Exchange Commission (“Commission”) and its staff on this important development in the over-the-counter (“OTC”) securities markets.1

I. Introduction

On September 16, 2020, the Commission adopted a final rule amending Rule 15c2-11 under the Securities Exchange Act of 1934 (“Exchange Act”),2 which addresses disclosures in the OTC markets and imposes requirements upon broker-dealers who publish quotations in such markets.3 Rule 15c2-11, as amended, will require a broker-dealer or a qualified interdealer quotation system to collect, record, and review for timeliness, accuracy, reliability, and public availability certain information related to securities before publishing a quotation, or submitting a quotation for publication, in any quotation medium for an OTC security, unless an exception applies. The rule, on its face, does not distinguish between types of securities, other than municipal securities, which Rule 15c2-11 expressly excepts. 4 The amendments became effective on December 20, 2020, with a compliance date of September 26, 2021. 5

For the reasons discussed below, we seek an order pursuant to Rule 15c2-11(g) to exempt the publication of quotations for all fixed income securities from Rule 15c2-11.6 If, however, the Commission is unwilling to issue an order exempting all fixed income securities from Rule 15c2- 11, we request that the Commission issue an order exempting the following from Rule 15c2-11: (1) the publication of quotations for government securities as defined in Section 3(a)(42) of the Exchange Act; (2) the publication of quotations for fixed income securities which are addressed by the disclosure regime of the federal securities laws; (3) the publication of quotations to institutional investors and broker-dealers; and (4) the publication of quotations for securities issued by banks, including brokered certificates of deposit (“CDs”) that are securities. We have had several conversations with the staff of the Commission’s Division of Trading and Markets related to this exemption request, which have been helpful to us in considering how to structure this request.

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 nearly 1 million employees, we advocate for 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). Bond Dealers of America is the only DC-based organization exclusively representing the interests of securities dealers and banks focused on the US fixed income markets.

2 17 C.F.R. § 240.15c2-11.

3 Publication or Submission of Quotations Without Specified Information, 85 Fed. Reg. 68124 (Oct. 27, 2020) (“Adopting Release”)

4 17 C.F.R. § 240.15c2-11(f)(4). In addition, exempted securities, as defined in Section 3(a)(12) of the Exchange Act, appear to be excluded from Rule 15c2-11 because exempted securities are excluded from Section 15(c)(2)(A) of the Exchange Act. While government securities are exempted securities, as defined in Section 3(a)(12)(A)(i) of the Exchange Act, government securities are included in Section 15(c)(2)(C) of the Exchange Act. See Section II.C. below.

5 Adopting Release at 68172. The compliance date is nine months after the effective date of the amended rule, except for the compliance date for paragraph (b)(5)(i)(M) of the amended rule, which is two years after the effective date of the amended rule. Paragraph (b)(5)(i)(M) requires a broker-dealer or a qualified interdealer quotation system, before publishing a quotation in a quotation medium, if relying on the “catch-all” provision, to collect and place in its records, review for timeliness and public availability, accuracy, and reliability, “similar financial information for such part of the two preceding fiscal years as the issuer or its predecessors have been in existence.”

6 17 C.F.R. § 240.15c2-11(g) (“Exemptive authority. Upon written application or upon its own motion, the Commission may, conditionally or unconditionally, exempt by order any person, security, or transaction, or any class or classes of persons, securities, or transactions, from any provision or provisions of this section, to the extent that such exemption is necessary or appropriate in the public interest, and is consistent with the protection of investors.”).

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