On July 11, the SEC approved a rule to require the national securities exchanges and FINRA to establish a market-wide consolidated audit trail to enhance regulators’ ability to monitor and analyze trading activity. The rule requires the exchanges and FINRA to jointly submit a plan detailing how they would implement an audit trail to collect and identify every order, cancellation, modification, and trade execution for all exchange-listed equities and equity options across all U.S. markets. The rule will be effective 60 days after publication in the Federal Register. SEC Release.
national securities exchanges
SEC Rule for Listing Standards for Compensation Committees and Advisers
On June 20, the SEC approved a rule that directs national securities exchanges to adopt listing standards for public company boards and compensation advisers. The new rule, required by the Dodd-Frank Act, requires exchange listing standards to address: (i) the independence of members on a committee; (ii) the committee’s authority to retain compensation advisers; (iii) the committee’s consideration of the independence of any compensation advisers; and (iv) the committee’s responsibility for the appointment, compensation, and oversight of the work of any compensation adviser. These changes will take effect 30 days after publication in the Federal Register. No later than 90 days after effectiveness, each exchange that lists equity securities must propose listing standards that comply with the new rule. The new listing standards must be approved by the SEC within one year of the new rule becoming effective. SEC Release. Rule.
SEC Approves Proposals on Extraordinary Volatility in Stocks and Market
On June 1, the SEC approved two proposals submitted by the national securities exchanges and FINRA that are designed to address extraordinary volatility in individual securities and the broader U.S. stock market. One initiative establishes a “limit up-limit down” mechanism to prevent trades in individual exchange-listed stocks outside of a specified price band. The second initiative updates existing market-wide circuit breakers which halt trading in all exchange-listed securities throughout the U.S. markets when triggered. The changes lower the percentage-decline threshold for triggering a trading halt and shorten the period of time that trading is halted. Changes will be implemented by February 4, 2013, and have been approved for a one-year pilot period. SEC Release. National Market System Plan Approval Order. Market-Wide Circuit Breaker Approval Order.
FINRA and National Securities Exchanges File Limit Up-Limit Down Proposal with the SEC
On April 5, 2011, FINRA and national securities exchanges filed a proposed plan with the SEC to establish a new “limit up-limit down” mechanism to address extraordinary market volatility in U.S. equity markets. The proposed mechanism would limit trades in listed equity securities to a price band set at a percentage level above and below the average price of the security over the preceding five-minute period, subject to certain exceptions. If approved, this mechanism would replace the circuit breakers which were put in place in response to market events on May 6, 2010. Comments must be submitted within 21 days from the date of publication in the Federal Register. SEC Release. Proposed Plan.
SEC Proposed Rules for Compensation Committees and Consultants
On March 30, the SEC proposed rules directing the national securities exchanges to adopt listing standards for the compensation committee of a company’s board of directors and compensation advisers, as required by the Dodd-Frank Act. The proposal also would require new disclosures for compensation consultants and conflicts of interest, and “listing standards” to address: (i) the independence of the members on a compensation committee; (ii) the committee’s authority to retain compensation advisers; and (iii) the committee’s responsibility for the appointment, payment, and work of any compensation adviser. Once an exchange’s new listing standards are in effect, a listed company must meet these standards in order for its shares to continue trading on that exchange. Comments must be submitted by April 29. SEC Release.
Stock-by-Stock Circuit Breaker Rule Proposals
On May 18, in response to the market disruption of May 6, the national securities exchanges and FINRA proposed rules to pause trading in individual stocks for five minutes if the price moves 10% or more over the preceding five-minute period. Initially, the proposed rules would be in effect on a pilot basis through December 10 and would apply only to securities included in the S&P 500 Index. Comments are requested within 10 days of publication of the proposed rules in the Federal Register. FINRA. NYSE. NASDAQ. NYSE Amex LLC. BATS Exchange, Inc. Chicago Board Options Exchange. Chicago Stock Exchange. EDGA Exchange, Inc. EDGX Exchange. NASDAQ OMX BX, Inc. National Stock Exchange.