Commissioner Hester Peirce issued a statement on Friday supporting the Trading and Markets Rule 15c2-11 no-action letter, but disagreeing with the very short extension of the compliance date for fixed income securities. She stated:
The Commission’s amendments to Exchange Act Rule 15c2-11 that were finalized last fall will take effect next week. In recent months, market participants have raised concerns about the potentially significant negative effects of these amendments on trading in the fixed-income markets. I agree with the staff of the Division of Trading and Markets that relief is necessary to forestall these effects. However, the time-limited relief—three months—being granted in the no-action letter released today is wholly inadequate to that need. Instead, we should issue longer Commission-level no-action relief and reopen the rulemaking as part of a broader fixed-income modernization initiative.
Commissioner Peirce’s statement indicates that while the text of Rule 15c2-11 has always contemplated application of the rule beyond equity securities, “there appears to have been limited, if any, application of the rule to fixed income markets prior to the Commission’s 2020 adopting release. Nothing in the adopting release suggests that the Commission considered the application of these rules to the fixed-income markets.”
Commissioner Peirce also noted in her statement that, in the context of the OTC equities market, the changes to Rule 15c2-11 could “have unintended harmful consequences on certain shareholders” which could have been mitigated by the establishment of an expert market; however, as I indicated in this blog, the Staff stated over the summer that the expert market was not on the Chair’s near term agenda. We will see the consequences of that decision beginning tomorrow.
– Dave Lynn