Disclosure of Order-Handling Information

March 7, 2019

The SEC has adopted amendments to Regulation NMS (“Reg NMS”) under the Exchange Act to require broker-dealers to make additional disclosures to customers regarding the handling of their orders. The main areas affected by new Reg NMS requirements implemented in the amendments are as follows:

  • Broker-dealers are required, upon customer request, to provide specific disclosures related to the routing and execution of the customers’ NMS stock orders submitted on a non-held basis for the prior six months, subject to two de minimis exceptions.1
  • On a quarterly basis, broker-dealers must make the NMS stock orders submitted on a held basis publicly available.

In addition, the SEC is amending Reg NMS to:

  • Include certain newly defined and redefined terms that are used in the amendments
  • Require that the public order execution report be kept publicly available for three years
  • Adopt conforming amendments and update cross-references to account for the rule amendments being adopted

ACA Guidance

The new disclosures, among other things, will provide customers with information about the average rebates their broker-dealers receive from trading venues, as well as the fees their broker-dealers pay to such venues. Broker-dealers are encouraged to reference SEC Press Release 2018-253 for a detailed description of the data point required under the amended disclosure requirements. Written supervisory procedures should also be updated to reflect changes in the disclosure requirements.

Relevant Dates

Announcement date: November 2, 2018

Effective date: January 18, 2019

Compliance date: May 20, 2019

 

For More Information

For more information about the new disclosure requirements, please contact your ACA consultant or Dee Stafford at (561) 628-5288 or dstafford@acacompliancegroup.com.

 

 

1The SEC also adopted two exceptions designed to minimize the implementation costs of the new disclosure requirement on broker-dealers, particularly small broker-dealers. The two de minimis exceptions are (1) a broker-dealer is not obligated to provide the report to any customer if non-held NMS stock orders constitute less than 5% of the total shares of the NMS stock orders that the broker-dealer receives from its customers over the prior six months, and (2) a broker-dealer is also not obligated to provide the report to a particular customer if that customer’s trades through the broker-dealer on average each month for the prior six months total less than $1,000,000 of the notional value of non-held orders in NMS stocks.