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SEC Rule 606 newsletter                                                                                                             August 19

 
 

Best Execution - 606 newsletter

 

The latest industry insights and regulatory updates

Welcome note

As crunch time for compliance approaches and as industry participants seek final clarification over the amendments, we explore 606 compliance.


To keep pace with today’s automated and complex equities market, the SEC has amended Rule 606 to update order handling and routing disclosure rules. New rules will require broker-dealers to disclose to investors new and enhanced information about the way they handle investors’ orders and ultimately make more informed choices about the brokers with whom they do business.

 

We aim to share with you updates about the recent amendments to the SEC 606 rule, its challenges, and tools for compliance.

 
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John Jannes


Director & Head of Product of Trading Analytics, IHS Markit


Regulatory updates

While the industry awaits publication of FAQs by the SEC, a further postponement of the effective data is possible. The SEC delayed the original compliance date to October 1 2019, in response to the industry's request for additional guidance and clarification. Yet no official FAQ has been published. With less than two months left before the October deadline, it is unlikely that firms subject to the rule will have enough time to alter procedures to accommodate new guidance. Industry groups such as FIF and STA have issued requests to the SEC for further postponement of the rule pending official publication of FAQs, as well as clarity on 'look-through' data requirements. 

 

Regarding the issue of look-through data, a growing number of firms have voiced opposition to the look-through provisions, citing that the look-through data is not explicitly defined, or mandated by the rule. Opponents of the look-through provisions are concerned that defining look-through provisions in an FAQ document format amounts to legislation through guidance, which is not how regulations should be enacted. 

 

Instead, some firms are calling for the SEC to either draft a new rule, or rule section, defining look-through requirements, or to drop the provision from the current requirement altogether. Another factor to consider is that the table layouts provided for 606(b)(3) do not easily accommodate the preliminary look-through guidance. For this, complying with look-through provision is not simply a matter of including additional data, it also requires new table layouts, venue definitions, or both. 

 

In the meantime, IHS Markit will continue to work under the assumption that the compliance date will remain as October 1, and is ready to adjust the service needed as soon as additional information becomes available.


Product updates

To help monitor and measure execution quality while fulfilling best execution obligations, market participants need a partner that understands the increasing complexities of the trade execution process and its impact on compliance reporting.

 

IHS Markit offers a comprehensive suite of compliance reporting services including a BestEx platform, SEC Rule 605/606 regulatory reporting and posting, and an integrated compliance workflow solution.

 

  • MTA integration with OMS providers:  
    • Live: 
      • Fidessa (version USTP v2018.2.19)
    • In UAT testing: 
      • Bloomberg
      • Flextrade/Colorpalette
    • In process to certify: 
      • Beta Access
      • Valdi NGO 
      • Eze Castle/RealTick

For more information,
visit ihsmarkit.com/bestex 

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