March 2, 2017
March 2, 2017
To: Securities and Exchange Commission
Re: Proposed FINRA Consolidated Order Trail Rules (6800 Series)
This comment is submitted by Wachtel & Co Inc, a self clearing broker dealer in Washington DC. The firm is OATS exempt under Finra Rule 7470 and has no experience with order reporting. The author (Bonnie K Wachtel) sits on the CAT Advisory Committee after being nominated by the Committee.
This comment follows several others to the effect that application of CAT will be devastating to the business model of our fifty year old, well managed low volume firm and others similarly situated. We make two requests in connection with the current proposed rules:
(1) Task Finra to review the cost/benefit impact of CAT on currently OATS exempt firms, particularly those that use manual orders. Rule 7470 reflects Finra’s prior determination that order reporting was not justified for this subset of firms. We strenuously disagree with overturning that finding absent review of applicable facts.
(2) As an interim measure, allow Finra to classify all OATS exempt firms as “small” under CAT definitions to provide three years for compliance. This should be so easy and so obviously warranted (given the huge incremental cost of first-time order reporting for those firms that choose to remain independent and comply) that we cannot imagine any objection.
In support of these requests, we provide as a separate attachment our three page abbreviated comments dated July 2016 entitled “The Compelling Case for Extending Finra Rule 7470 to Order Reporting in CAT.” That document:
(l) describes the extraordinary protections included in this narrowly drawn exemption, and the startling cost/benefit imbalance in applying CAT to covered firms;
(2) details the confusion in the SEC’s definition of “small firm” under CAT and the disjunction between the CAT definition, industry common definitions and a definition tied to the purposes of Rule 613; and
(3) answers SEC responses from prior filings.
Finally, we note that since CAT’s recent approval, the President has requested a six month delay of DOL Fiduciary Rule implementation to accommodate further cost/benefit review. This development--signaling a heightened concern for the burdens of regulation on business and the disproportionate burden on small firms–should inform the SEC’s response here.
We appreciate your consideration and the opportunity to present these comments.