United States: SEC grants deadline waiver for application of “listing rule” to debt securities

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The SEC has sent a no-action letter to FINRA stating that it will not take any enforcement action against member firms that do not comply with SEA Rule 15c2-11 (“Initiating or Resuming Quotes Without Specific Information” ( the “rule”) fixed income securities until January 3, 2022.

The Rule provides that a broker cannot submit quotes for a security in a “quotation medium” other than a national stock exchange unless the broker is able to meet the information requirements specified as a title and its issuer. The Rule, which has been in effect since 1971, has always applied to fixed income securities. The Rule has never been applied to debt securities. The SEC has made it clear that it intends to interpret the amended rule as applying to debt securities. The date for compliance with the amended rule is September 28, 2021. Market participants are trying to determine how they can comply and whether it is possible to create a market for fixed income securities in light of the obligations imposed by the modified rule. While the SEC granted a three-month lead time for fixed income securities, the SEC letter did not indicate whether the Commission could reconsider its decision to apply rule 15c2-11 to income securities. fixed, in whole or in part.

SEC Commissioner Hester M. Peirce issued a statement describing the time-limited remedy as “inadequate” and urging the Commission to “reopen the regulation” regarding the application of rule 15c2-11 in part of “a broader fixed income modernization initiative.” . “


As Rule 15c2-11 was written for the equity market, its application to trading in fixed income securities – which trade in a very different way from stocks – has the potential to create significant stress in the market. In particular, it may be difficult for brokers to provide quotes for many fixed income securities.

It is likely that there are a significant number of fixed income securities for which it is essentially impossible to comply with the Rule. For example, dealers may simply not be able to meet the disclosure requirements for asset-backed securities issued by the private sector. The inability of brokers to provide such quotes, and therefore facilitate liquidity, could also negatively impact related credit markets (such as commercial loans and mortgages) whose proceeds are indirectly distributed as securities. asset-backed.


As the SEC No Action Letter notes, rule 15c2-11 has always applied to debt securities, or at least it has not expressly excluded them from its application. This raises the interesting question of why no one noticed this when the Rule was adopted in 1971 (36 FR 18641 (Sept. 18, 1971). One possible reason is that the rule applies to citations on a “medium. citation, ”which was defined as a“ communications network… used by brokers or traders to publicize their interests in transactions in any security… ”In 1971, equity securities were quotes on such “quotation media”, such as the pink sheets, but it is likely that fixed income securities were not quoted in this way. In fact, the widespread listing of fixed income securities on media Electronic trading is a much more recent development than trading equity securities in this manner. If this assumption is correct, it means that the Rule as adopted did not apply, in practice, to fixed income securities and that nobody thought about how it might apply to these titles because there was no reason to.

Further, if the above assumption is correct, then it seems incumbent on the SEC to provide a general exemption from Rule 15c2-11 for fixed income securities while the SEC considers whether the Rule should apply to these titles and, if so, how the Rule should apply.

In addition, the application of the Rule to fixed income securities raises questions under the Administrative Procedures Act. Is it appropriate for the SEC to declare the rule applicable to fixed income securities when there was no intention at the time of adoption to apply the rule to such securities? Is it appropriate when the Rule has been able to be applied to such securities for at least the past 20 years (when quote media have been used to trade fixed income securities), but the SEC has not ?

Primary sources

  1. SEC No Action Letter: Fixed Income Rule 15c2-11 Amended
  2. SEC Statement, Hester M. Peirce: Statement on Staff No Action Letter Regarding Fixed Income Rule 15c2-11 Amended

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