WASHINGTON – The American Securities Association (ASA) today sent a letter to the Securities and Exchange Commission (SEC) requesting permanent relief from Rule 15c2-11 for fixed income securities, codifying the Commission’s November 2022 no-action letter set to expire on January 4, 2025.
“Making the no-action letter permanent will allow broker-dealers to continue quoting these securities without any interruption in the market structure or the liquidity that supports fixed income securities,” ASA President and CEO Chris Iacovella wrote in the letter. “This will also provide certainty to market participants by removing the unpredictability of seeking no-action relief every few years and avoid potential disruptions in the fixed-income markets.”
In the letter, ASA outlined several practical challenges warranting consideration:
Quotation Mediums: There is a lack of clear definition of what constitutes a "quotation medium" under the rule and uncertainty about what actions constitute "quoting" versus simply trying to liquidate inventory.
Retail Trading Platforms: Many retail clients use white-labeled versions of platforms for order execution, creating uncertainty about whether these platforms are considered "quotation mediums" under the rule.
Inventory Management vs. Market Making: There is confusion over whether seeking to liquidate inventory (e.g., through a "bid wanted") constitutes a quote under the rule.
Technology Limitations: There is difficulty in controlling auto-execution features on some platforms, especially for retail client bases. Additionally, high costs are associated with implementing controls for a relatively small number of CUSIPs.
Regulatory Oversight: There are questions about how stringently Self-Regulatory Organizations (SROs) will enforce the requirements and concerns about the practicality and cost-effectiveness of compliance for firms dealing with a limited number of affected securities.
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The American Securities Association (ASA) represents the retail and institutional capital markets interests of regional financial services firms who provide Main Street businesses with access to capital and advise hardworking Americans how to create and preserve wealth. ASA’s mission is to promote trust and confidence among investors, facilitate capital formation, and support efficient and competitively balanced capital markets. This mission advances financial independence, stimulates job creation, and increases prosperity. The ASA has a geographically diverse membership of almost one hundred members that spans the Heartland, Southwest, Southeast, Atlantic, and Pacific Northwest regions of the United States.
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