Rule 201’s Policies & Procedures Approach

SIFMA’s Short Sale Price Test Regulatory Working Group and its Short Sale Price Test Ops/Tech Working Group, have been working diligently over the last seven months with FINRA, exchanges and other market participants to determine the steps that are necessary for successful implementation of Rule 201 of Regulation SHO. Through this collaborative process, a number of operational and interpretive issues have been identified and resolved; however, as of the present date, there still remain a few unanswered questions that will affect programming. Additionally, as the Securities and Exchange Commission (SEC) can hopefully appreciate, despite firms’ proactive and diligent efforts to confirm their understanding of the operation of this new price test and to program and test their systems accordingly in order to meet the November 10, 2011, deadline, unexpected issues and problems may arise that firms simply could not have anticipated, especially in the first few months after November 10, 2011. SIFMA therefore requests that, when reviewing and examining firms for compliance with Rule 201 after November 10, 2011, the SEC and FINRA Staff take into consideration the fact that initial glitches may occur, particularly in the first few months, and that, to the extent that firms take action to address those initial glitches and adjust their policies and procedures accordingly to comply with Rule 201’s requirements, firms should be deemed to be in compliance with Rule 201.