Compliance Highlights

Below is information regarding certain new SEC and Exchange rules and requirements with upcoming compliance dates.

Market Access Rule (SEC Rule 15c3-5)

The compliance date for the new SEC market access rule, Rule 15c3-5 under the Exchange Act, was July 14, 2011. Rule 15c3-5 requires a broker-dealer with market access to an exchange or alternative trading system, or that provides a customer or any other person with access to an exchange or alternative trading system through use of its market participant identifier or otherwise, to establish, document, and maintain a system of risk management controls and supervisory procedures reasonably designed to manage the financial, regulatory, and other risks of its business activity. The related approval order is available on the SEC website at the following link: http://www.sec.gov/rules/final/2010/34-63241fr.pdf. The SEC granted certain limited extensions to the compliance date as follows:

Fixed Income Securities: The SEC extended the compliance date, until November 30, 2011, for all the requirements of Rule 15c3-5 for fixed income securities. See limited extension order: http://www.sec.gov/rules/final/2011/34-64748fr.pdf.
All Securities: The SEC extended the compliance date, until November 30, 2011, for the requirements of Rule 15c3-5(c)(1)(i) only for all securities. See limited extension order: http://www.sec.gov/rules/final/2011/34-64748fr.pdf.
Floor Broker Manual Orders: The SEC extended the compliance date, until November 30, 2011, for the automated controls requirement of Rule 15c3-5(c)(1)(ii) and (c)(2) only for the floor broker operations of broker-dealers with market access that handle orders on a manual basis. See limited extension order: http://www.sec.gov/rules/exorders/2011/34-65132.pdf.

The SEC has also made available a Small Entity Compliance Guide, which is located at http://www.sec.gov/rules/final/2010/34-63241-secg.htm.

The SEC staff has issued an alert regarding regulatory concerns related to master/sub-account structures and stated that the Market Access Rule is intended in part to address some of these concerns. The announcement and alert are located at http://www.sec.gov/news/press/2011/2011-198.htm and http://www.sec.gov/about/offices/ocie/riskalert-mastersubaccounts.pdf.

Additional information on the SEC market access rule can be found in the following circulars: CBOE RG11-065/C2 RG11-004; CBOE RG11-085/C2 RG11-009; CBOE RG11-105; CFE RG11-22; CFE RG11-17; CBOE RG11-114; CBOE RG11-128/C2 RG11-031 and CBOE RG11-134/C2 RG11-034.

If you have any questions regarding the Market Access Rule, please feel free to contact the following:

SEC:

Division of Trading & Markets, Office of Interpretation and Guidance: tradingandmarkets@sec.gov or (202) 551-5777
Marc F. McKayle, Special Counsel, Division of Trading & Markets: (202) 551-5633
Theodore S. Venuti, Special Counsel, Division of Trading & Markets: (202) 551-5658
Daniel Gien, Attorney, Division of Trading & Markets: (202) 551-5747

CBOE:

Regulatory Interpretations and Guidance Line: (312) 786-8141

Large Trader Reporting Rule (SEC Rule 13h-1)

The effective date for the new SEC large trader reporting rule, Rule 13h-1 under the Exchange Act, was October 3, 2011. The compliance date was December 1, 2011 for the requirement on large traders to identify to the SEC pursuant to Rule 13h-1(b) and is April 30, 2012 for broker-dealers to maintain records, report, and monitor large trader activity pursuant to Rule 13h-1(d), (e), and (f).

Rule 13h-1 requires a "large trader," defined as a person whose transactions in NMS securities (including options) equal or exceed 2 million shares or $20 million during any calendar day, or 20 million shares or $200 million during any calendar month, to identify itself to the SEC and make certain disclosures to the SEC on Form 13H. The related approval order is available on the SEC website at the following link: http://www.sec.gov/rules/final/2011/34-64976fr.pdf.

Additional information can be found in the following C2 circular: C2RG11-044

If you have any questions regarding the Large Trader Reporting Rule, please feel free to contact the following:

SEC:

Division of Trading & Markets, Office of Interpretation and Guidance: tradingandmarkets@sec.gov or (202) 551-5777
Richard R. Holley III, Assistant Director, Division of Trading & Markets: (202) 551-5614
Christopher W. Chow, Special Counsel, Division of Trading & Markets: (202) 551-5622
Gary M. Rubin, Attorney, Division of Trading & Markets: (202) 551-5669
Kathleen Gray, Attorney, Division of Trading & Markets: (202) 551-5305

CBOE:

Regulatory Interpretations and Guidance Line: (312) 786-8141

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