September 9, 2021

The SEC Staff Says No Go to an Expert Market Alternative

Following adoption of the Rule 15c2-11 amendments, OTC Link LLC — responding to suggestions made by the Commission itself that a so-called “expert market” could “enhance liquidity for sophisticated or professional investors in grey market securities” — submitted a request on behalf of certain broker-dealers for an exemption from certain of Rule 15c2-11’s requirements for quotations made on electronic platforms where the distribution of such quotations is limited to sophisticated or professional investors. In December 2020, the SEC proposed to grant OTC Link LLC’s request for exemptive relief and issue a conditional exemptive order, and solicited public comment on that proposal.

The hopes for an expert market alternative were dashed last month, when the staff of the Division of Trading & Markets put out a statement which said:

This proposed order is not on the Chair’s agenda in the short term. Accordingly, on September 28, 2021, the compliance date for the amendments to Rule 15c2-11, we expect that broker-dealers will no longer be able to publish proprietary quotations for the securities of any issuer for which there is no current and publicly available information, unless an existing exception to Rule 15c2-11 applies.

Without the expert market alternative available, those issuers who fall into the category of “OTC Pink – No Information” (i.e., those issuers who cannot or will not provide current and publicly available information) will fall off the Rule 15c2-11 cliff later this month, with nowhere to land.

– Dave Lynn