Bowing to industry requests, the Securities and Exchange Commission has delayed implementing parts of the market access rule. But the ban on "naked access," the main thrust of the new regulation, will still go into effect as planned on July 14.
In a notice on Monday, the SEC announced it was extending the compliance date for certain requirements of Rule 15c3-5 until Nov. 30. Specifically, brokers will be able to put off having to perform aggregated risk checks, and all fixed income products will be temporarily exempt.
The SEC passed the rule last year, vowing to end the practice of brokers offering unfiltered or "naked" access to exchanges and alternative trading systems. Brokers providing naked access require only post-trade monitoring systems for their clients, or sometimes no monitoring systems at all.
That will still come to an end on July 14, when equities, options, exchange traded funds and security-based swaps will all be subject to pre-trade risk checks when brokers offer sponsored access. These arrangements allow clients to use their broker’s MPID to go directly to an exchange or ATS.
While risk checks will be required on individual trades, the SEC is delaying until November checks on aggregate risk for each customer and broker-dealer. The agency is also pushing back to November the compliance date for all risk checks on fixed-income trades.
"After canvassing members of the industry, a lot of open questions remain on what in fact is in effect on July 14," said Ted Myerson, chief executive officer of service provider FTEN. "The ban on naked access is still in effect come July 14, and all broker dealers need to have appropriate measures in place. That is still a big change for the industry."
In delaying portions of the rule, the SEC noted it had received requests from the Financial Information Forum, the Securities Industry and Financial Markets Association and the Wholesale Market Brokers’ Association to take a phased-in approach to implementation.
The New York Stock Exchange, Nasdaq, BATS and DirectEdge also asked the agency to delay implementation of the new rule.
