The Securities and Exchange Commission (SEC) has proposed four rules to reform the structure of US financial markets. One of these proposals is an update to Rule 605, which focuses on order execution and routing quality disclosure. The proposed update aims to expand execution quality disclosure to include larger broker/dealers and introduce new statistical measures of execution quality. This proposal has garnered widespread support from the industry [d33ef604].
An article from Chief Investment Officer discusses the order in which these proposed rules should be finalized. The consensus among industry experts is that Rule 605 should take priority and be the first to be finalized. The article argues that updating Rule 605 first would establish baseline data to evaluate the need for the other three rules and measure their effectiveness if adopted. It also suggests that finalizing Rule 605 first could help evaluate the value of reducing tick-sizes and inform the regulator about which stocks are truly tick-constrained. On the other hand, the order competition and best execution proposals are widely unpopular in the financial industry [d33ef604].
The SEC is expected to finalize Rule 605 and the tick-size proposals by the first quarter of 2024. However, the path to finalizing the order competition rule is less clear. The article provides valuable insights into the potential impact of prioritizing Rule 605 and highlights the importance of establishing a strong foundation for evaluating market structure reforms [d33ef604].
The Division of Examinations of the U.S. Securities and Exchange Commission (SEC) has published its annual examination priorities for 2024. The examinations will prioritize areas that pose emerging risks to investors or the U.S. capital markets, as well as core and perennial risk areas. The priorities include assessing investment advisers' compliance programs, evaluating compliance with the Marketing Rule, reviewing registered investment companies' fees and expenses, derivatives risk management, and compliance with exemptive order conditions. The Division will also examine broker-dealers' compliance with Regulation BI, including recommendations regarding products, conflicts of interest disclosures, and processes for reviewing alternatives. Additionally, the Division will review the content and filing of Form CRS, compliance with the Net Capital Rule and Customer Protection Rule, and broker-dealer risk management controls. The Division will also conduct examinations of national securities exchanges, FINRA, MSRB, clearing agencies, municipal advisors, security-based swap dealers, transfer agents, and critical market infrastructure entities. The Division will focus on cybersecurity, emerging technologies, and anti-money laundering programs.